LIBRARY OF CONGRESS. 



Shelf..2_5_L 

UNITED STATES OF AMEKIOA. 



POLITICAL ECONOMY 



FOR 



AMERICAN YOUTH 



WEITTEN PROM 

AN 

AMERICAN STANDPOINT 



JACOB HARRIS PATTON, Ph. D. 



AUTHOR OF 

FOUR HUNDRED YEARS OF AMERICAN HISTORY; " "NATURAL 
RESOURCES OF THE UNITED STATES;" *' POLITICAL 
PARTIES IN THE UNITED STATES," ETC. 



NEW YORK ^ / X I 

A. LOVELL & CO. 



^ '^''v 

^ 



t^- ^2- 



Copyrighted 1892, by 
A. LOVELL & CO. 



PEEPACE. 



The present time may be deemed propitious for the 
presentation to the public of a text-book on Political 
Economy designed for American youth and written 
from an American standpoint. 

It would seem expedient that a progressive nation of 
65,000,000 people, so situated as to be virtually inde- 
pendent of the rest of the world for the comforts and 
substantials of life, should adopt, for its own material 
interests, an economical system primarily adapted to 
its own conditions. At the same time, it can consist- 
ently recognize at their full value its commercial and 
industrial relations to the outside world. 
- The reasons for adopting the policy thus indicated 
appear more clearly when the fact is fully considered 
that the American people occupy a territory — exclud- 
ing Alaska — nearly equal to that of all Europe. The 
domain of Europe extends from the 35th parallel 
to four degrees beyond the Arctic Circle ; that of the 
United States lies wholly within the choicest portion 
of the temperate zone, as it extends from within half a 
degree of the Tropic of Cancer to the 49th parallel on 
the northwest and on the northeast to the 47th. 

On both sides of the Arctic Circle are immense bar- 
ren wastes because of the climate; on the other hand 
in the United States, with the exception of the higher 
portions and sides of the mountains, there is scarcely a 



PBEFACE, 

square mile that is not available for cultivation or 
pasturage. The territory of the Union, also, abounds 
in mineral wealth of untold value; it has a soil re- 
markable for its fertility, which is greatly enhanced 
by a copious rain-fall, while a diversified climate 
causes it to yield an abundance of diversified produc- 
tions. These comparisons are drawn for the purpose 
of enabling American youth to appreciate more per- 
fectly their goodly heritage. 

The effort has been to present the study in a practi- 
cal manner, and fine-spun theories and abstractions 
have not been discussed. The aim has been to avoid 
prolixity, to be concise but clear, and to present the 
i'i<^i'ntial phases of the study in such manner as to in- 
terest the student who may be willing to make the 
proper exertion to understand the subject. 

In respect to diiferences of opinion on certain phases 
of Political Economy, that have elicited special discus- 
sions — for illustration, free-trade versus protection — 
the arguments for and against, as set forth by their re- 
spective advocates, are, we trust, fairly and concisely 
given, and in such terms as to be comprehended by 
the diligent pupil. 

The questions are intended to be directive, but not 
leading. They are limited to the main points in the 
section, and are not so numerous as to make the 
answers merely mechanical on the part of the pupil, 
but are so constructed that to answer them the lesson 
must be studied. 

J. H. P. 

New York City, July, 1892. 



CONTENTS. 



Page. 
INTRODUCTION". . . 3 

The Demands of the Times 

ChAPTEK I. — FOKMS OF GOVEENMENT. . 5 

The Family, the Basis of Society and of Government — 
Domestic and Political Economy — The Necessity of Labor 
—The Origin of Trade. 

Chapter II. — Political Economy Defined. . 9 

First General Law— Second General Law — Third Gen- 
eral Law — Fourth General Law— Fifth General Law — 
Education a Promoter of Successful Labor. 

Chapter III.— Wealth and Labor. . 16 

Wealth Defined— Original Source of Wealth— Why 
Wealth Increases — Man's Labor Unlimited — Labor Honor- 
able for All — The Essential Value of Labor — Labor that is 
Unproductive — Labor Influenced by the Demand. . 

Chapter IY. — Value. . . 25 

Two Definitions of Value — Value a Relative Term — Ser- 
vice for Service — Value and Price Compared— Supply and 
Demand— Effect of Competition. 

Chapter V. — The Four Divisions. . 32 

Political Economy — Distribution and Exchange— Labor 
Man's Directive Power — Mental Wealth — The Training of 
Mankind — Few Inventors — The Extension of Knowledge — 
Mind Supplemented by Nature — Results of Mental Labor — 
Inventions — An Incident — Natural Agents — Inanimate 
Power. 



iv CONTENTS. 

Chapter VI.— The Three Industries. . 45 

Transportation — Commercial Industry. 

Chapter YII.— Division of Labor. . 50 

Effect Produced by a Book— Illustration— The Barrel— 
The Loaf of Bread— Advantages of Division of Labor- 
Evils and Benefits of the System. 

Chapter VIIL— Capital. . . 57 

Money of Itself not Capital— The Range of Capital— Pro- 
ductive and Unproductive Capital— Capital; Active or 
Fixed— The Cause of Over-Production. 

Chapter IX.— Skill and Muscle, Forms of Capital. 64 

Dividends Derived from Skill— The Union of the two 
Kinds of Capital— The two Classes of Capital Cooperate. 

Chapter X.— Practical Cooperation. . 69 

An Ideal Arrangement— The Contrast with Honest 
Work— The Good-will between Capital and Labor— The 
more Capital the more Advantage to the Wage-earner — 
Honest Work and Ample Wages— Mind is the Director— Ed- 
ucation and Cooperation— Morality and Cooperation— The 
Social Element in Cooperation . 

Chapter XL— Taxation. . . 80 

Expenses of two Governments — Two Modes of Levying 
Taxes— Third Mode— The Key to the Adjustment— The 
Key Applied— The Question and Answer— The Railroad 
President's Views— Other Taxes Required. 

Chapter XII.— A Paternal Government.— Its 
Legislation. •...., 91 

A Phrase that Misleads— Judicious Legislation— High 
Wages and Savings— What Governs the Price— Mode of 
Living. 



CONTENTS. 



Chapter XIII.— Wages. . . 97 

Different Names for Wages — Real and Nominal Wages — 
Evils of Speculation— The Mode of Payments — Conditions 
that Affect Wages. 

Chapter XIY. — Wages Continued. . 104 

Intelligence an Element of Success — Numbers Work for 
Wages — Income from Joint Exertion — The Contingencies 
of the two Classes of Incomes — The Cost of Living — 
Incidental Influence on Wages. 

Chapter XV. — Wages Continued. , 111 

A Geographical Comparison — Diversities of Industries 
Affected by Climate— Competition Affects Wages— Other 
Results of Competition. 

Chapter XYI.— Wages Concluded. . 117 

Labor Unions Affect Wages — Wages Raised by Wrong 
Measures — Mutual Duties and Rights — Aspirations for 
Success and Harmony — Wages of Women — The Rate of 
Woman's Wages. 

Chapter XVIL— A Home Market. . 124 

Advantages of a Home Market — The Values of Foreign 
and Home Markets Compared — Europe's Advantage in 
Population — The American People mutually Dependent — 
Mutual Interests — The two Interests Maintained — What 
Common Right have Manufacturers? Who Pays the Duty? 
Inter-State Commerce Act — The Main Object of Commerce 
is not to Obtain Money — The two Methods of Regulating 
the National Revenue — The Nation Homogeneous. 

Chapter XVIII.— Rent. 139 

Titles to Land — Definition of Rent — Differences in Lands 
— The Limit of Product— Ground-Rent— The Degrees of 
Value in Land — The Effect of Population on Rent — 
Contingencies of Land-Holding. 



vi CONTENTS. 

Chapteb XIX.— Interest. . . 146 

Consideration in making Loans— Supply and Demand 
for Money — Usury Laws — Dividends and Profits — When 
liable to Risks. 

Chapteb XX.— Exchange. . . 154 

What is Essential to Exchange — The Element of Value — 
Competition — Variations in Value — The Necessity for 
Exchange — The Effect of Exchange — Exchange within the 
Union — Exchange of Home Manufactures — Exchange is 
Division of Labor. 

Chapter XXI.— Money. . . 164 

Standards of Value — Coinage — Coinage in Ancient Times 
— Coinage in Modern Times — The Standard of Values — 
Bimetallism — Legal Tender— Fluctuations in the Value of 
Gold and Silver. 

Chapter XXII. — Credit. . . 174 

Forms of Credit — Credit Given Banks — Bonds — Bank 
Notes — The Basis of Credit — Utility of Credit — Checks, 
Bills of Credit — The Clearing-House — Credit may be 
Abused. 

Chapter XXIIL— Banking. . . 182 

Benefits Derived from Loans— Promissory Notes — Issue 
of Notes or Bills — Savings-Banks — Commercial Banks. 

Chapter XXIV.— National Banks. . 187 

State Banking — Efforts to Remedy the Evil — The Finan- 
cial Basis — Capital Obtained, how? 

Chapter XXV. — Free-Trade and Protection. 191 

Taxes Adjusted — The Terms Defined — Competition Reg- 
ulated — Fair Competitions — Universal Free-Trade not 
Adapted to the United States — The Non-judicious Policy 



CONTENTS. vii 

— Free-Trade Discriminates in Favor of Foreign Property 
— Self-Interest Governs Commerce — The Philanthropic 
Theory — Historical Statements — Wise Statesmanship — 
Judicious and Protective Legislation — Theory versus Prac- 
tice. 

Chapter XXVI.— Free-Trade and Protection 
Continued. ...... 207 

The Two Aphorisms — High Wages or Low — Successful 
Industries Mutually Beneficial — Workpeople Affected by 
Free-Trade — Fair Competition — International Free-Trade 
not Available— The Adaptation for Home Free-Trade — 
Elements of Harmony — Free-Trade not Essentially Inter- 
national — A Tariff to Sustain Wages — Intelligence in 
Manufacturing — Assertions and Facts — Wages Seek their 
Level — Cheap Commodities not the Only Good Desirable — 
Our Home Trade Aided by the Tariff — Historical Illus- 
trations—A just Comparison adduced — Keciprocity — 
Bounties. 

Chapter XXVIL— For Revenue Only. . 229 

To Whom the Greater Benefit Accrues — Comparative 
Value of Raw Material — The Summary — A Primary Object 
— A Secondary Object — Two Modes of Regulating Revenue 
— Important Object attained— Trusts. 

Chapter XXVIIL— Socialism. . . 239 

The Caste Influence — Aims of Socialism — State Aid 
Limited — The Results of Socialism. 

Chapter XXIX.— Railroad Corporations. 245 

Railroads — How Organized — Public and Private Inter- 
ests—The Agent of the State — The Advantages of Rail- 
ways. 

Chapter XXX.— The National Debt. . 250 

The Nation's Debts at Different Periods — Modes of 



viii CONTENTS. 

Obtaining Funds — The Dilemma — Summary of Funds 
appropriated — Different Classes of Bonds — Funding. 

Chapter XXXI. — The Labor Question. . 256 

Application of the Golden Rule — Associations for 
Mutual Aid — Price of Labor and Strikes — Distribution of 
Profits — Duties enjoined upon Workmen — Wages in Pro- 
portion to Merit. 

Chapter XXXII. — Care for Future Generations. 264 

Legislation to Prevent Loss — Various Aids to Agricul- 
ture — The Test for Native Voters — The Foreigners also 
Qualified, 



INTRODUCTION. 



1 — 6. In a complete and practical education of 
American youth, it is fitting that the study of Politi- 
cal Economy should hold an honored place, inasmuch 
as this branch of knowledge, so suggestive in its main 
principles, is valuable to both sexes in the active du- 
ties of life. When entering upon these duties our 
youth are virtually free from a class of influences that 
somewhat hinder the progress of the youth of the old 
world, such as certain social arbitrary distinctions, 
that prevail in the society of the latter, which in a 
measure preclude an open field for competition in 
the affairs of common life. On the other hand, the 
American youth — as a result of his birthright of politi- 
cal equality — develops self-respect, a corresponding 
self-improvement and a dignified self-reliance. The 
combination of these three traits of character, consti- 
tutes the kind of Aristocracy that the American peo- 
ple recognize and delight to honor. 

2. The Demands of the Times. — Is it not time that 
the youth of 65,000,000 people, who are thus free 
and untrammeled, should study social science and polit- 



4 INTRODUCTION. 

ical economy in the light of their own surroundings, 
thus utilizing whatever phase of the science may be 
specially adapted to their own condition? 

The question may well be asked, why may not our 
young women in the High Sehools or Academies, 
Seminaries or Normal Schools engage in the study of 
this science, as well as the young men in colleges ? 
The young woman who teaches the higher branches of 
an education, requires a knowledge of this study, as 
much as does the young man who adopts the same 
profession. At tliis day, especially in our own land, 
questions are arising in respect to the part woman 
shall take in public affairs. In some States she has 
already become a voter on questions of education, tem- 
perance reform, and in municipal management, and 
frequently holds office by election or appointment. 
The tendency is to welcome woman^s influence on vital 
reforms in morals and education, and in some practi- 
cal manner. The sooner she is prepared intelligently 
to exert that influence on these questions of the day, 
the better will it be for the interests of the entire 
people. 



POLITICAL ECONOMY. 



FORMS OF GOVERNMENT. 

3. The earliest record we have of a government is 
that of the patriarchal, which commenced with the 
father as the head of the family, the office being trans- 
mitted to the eldest son. This form was more suited 
to nomadic or roaming peoples, who lived upon the 
products of their flocks and herds, than to cultivators of 
the soil in connection with other industries, who, 
also, lived in permanent homes. In process of time 
the nomadic family became a clan or tribe, and grew in 
numbers by natural increase; meanwhile ambitious 
chiefs extended its influence and strengthened its 
power, and often made it stronger in the acquisition of 
territory by means of conquest, and finally an empire 
was thus constituted. Such governments became des- 
potisms, and soon the mass of the people were held in 
absolute subjection to hereditary rulers. This form of 
government prevailed in Asia from the earliest times, 
and with it the plurality of wives, which custom has 



6 POLITICAL ECONOMY. 

always been a hindrance to the spread of Christianity 
in the far East^ since the latter system of religion has 
ever held as sacred the marriage relation between one 
man and one woman. 

4. The Family, the Basis of Society and of Government. 

— In contrast with the patriarchal were the govern- 
ments that prevailed among the nations of Europe, that 
of Greece being the earliest and brightest example, while 
that of the earlier Romans wS,s either derived from the 
former or may have been original, but coincident. Both 
were, however, in the main, based upon the family as 
constituted by one man and one woman — husband and 
wife — and their children. This may be said, not 
merely of the Greeks and Romans, but with equal 
justice of the Gauls and the Germans and hence the 
Saxons. Still more was the sentiment of woman's 
social equality with man afterward strengthened by 
the diffusion of Christianity, which alone of all relig- 
ions recognizes the true relation of woman, as the 
helpmeet of man in promoting a higher and purer civ- 
ilization. 

5. Domestic and Political Economy. — The term econ- 
omy is derived from a Greek word, olKovo/uia — oihonomia 
— meaning the management of a household or family. 
The first to inquire into the principles governing man's 
social life were Greek writers, some of whom lived 
nearly four hundred years before the Christian Era. 
They treated the subject in an elementary way and as 
pertaining to the family alone, giving directions how 



FORMS OF GOVERNMENT. 7 

to make provision for the comforts of its members. 
This may be classed as domestic economy, on which 
separate books have been written. 

When families congregate together and thus consti- 
tute a community, the treatment of the subject 
demands a more enlarged form, and, instead of apply- 
ing rules to one family alone, it extends to many, or 
to society at large. The latter, being more extensive 
and more diversified in character, requires a name in 
order to express distinctly its various relations, and 
therefore, the qualifying word political is introduced. 
This term comes also from a Greek word Trorirrjc — 
polites — meaning a citizen, and political ecojiomy 
properly treats of the relations of people to one 
another in the capacity of citizens. Thus this science 
has grown out of the conditions of society, which, in 
its diversified forms or grades, has become instituted, 
because of man's loving to associate with his fellow- 
man, as well as from the relation of the sexes and the 
love of children as exemplified in the family. In this 
connection, it is proper to remark that political econ- 
omy, as a study, is entirely distinct from the ideas 
involved in the term politics as commonly used. 

6. The Necessity for Labor. — A supreme authority 
has established a law by which ^^man must eat 
bread in the sweat of his face,"' and consistent with 
that law, the same benevolent authority has so con- 
stituted his physical nature, that he is happier, all 
things considered, when properly employed than when 
improperly idle, Man, different from other animals. 



8 POLITICAL ECONOMY. 

requires that his food should be prepared in some man- 
ner, as, in the main, he cannot use it in the form pro- 
duced by nature. In addition he must be protected by 
clothing and shielded from the inclemency of the 
weather by being housed. To obtain all these require- 
ments, labor is demanded on his part. 

The Origin of Trade. — In early times the wants of 
mankind were very simple, and they were easily sup- 
plied, but as the race became more advanced in civili- 
zation, these wants or desires increased in proportion, 
and each individual, finding it impossible to supply all 
his desires by his own exertions, was compelled to have 
recourse to the labor of others. The latter, however, 
required compensation for their labor, and hence grew 
up a system of barter or exchange of products between 
the individuals of the same community. In this 
primitive manner we may imagine trade first began in 
society, and also that certain persons in making 
articles needed by their neighbors acquired skill and 
facility in that special work. Meanwhile improve- 
ments were made, and as,the demand for his manufact- 
ured articles increased, the original mechanic hired 
assistants, and at length his workshop became a 
factory. 

It is not within the scope of this book to trace the 
growth of the wants of man, nor the means by which 
they have been supplied up to the present time. In 
the latter respect, when compared with the past, this 
is the golden age of civilized society. 



II. 

POLITICAL ECONOMY DEFINED. 

7 — 13. This science one authority defines as: 
'^That branch of philosophy which discusses the 
sources and methods of material wealth and prosperity 
of a nation;" and another, as "that branch of social 
science, which treats of the production and appli- 
cation of wealth to the well-berng of man in society." 
These two definitions thus combined are intended to 
represent the science in its completeness. In this 
study we must bear in mind the intimate relation that 
exists between the mere acquisition of wealth for its 
own sake, and its practical use and influence upon the 
people themselves, who constitute the Nation. The 
people by their industry make available the hidden 
treasures of nature, and utilize them in promoting the 
welfare of society by raising the standard of comfort 
among its members, and thus elevating them to a 
higher plane of culture and of refined tastes. The 
study may, therefore, be deemed as in intimate con- 
nection with social science, or tlie knowledge of man 
himself in the relations growing out of his desires, 
tastes and aspirations for a higher grade of character. 
For this reason, political economy, as a study made 
practical, obtains only among peoples advanced in civ- 
ilization, and, the higher the plane of that civilization, 



10 POLITICAL ECONOMY. 

the more refined will be the tastes of the people and 
the greater the extent of their individual wants — phys- 
ical, moral and sesthetic. With each successive gener- 
ation, the plane of a Christianized civilization rises 
higher and higher. This science, when applied to 
society or the people taken collectively, will, therefore, 
assume proportions corresponding to their many 
increasing desires and wants, and in supplying them 
the whole world, with its commerce and industrial 
skill, is to-day and ever will be, directly or indirectly, 
laid under contribution. 

8. First General Law. — In dealing with man the Cre- 
ator has established laws in accordance with which ;^ — 
He confers nothing upo7i him that he can acquire by 
his own exertion. 

Man cannot furnish the air he breathes ; nor sun- 
shine and rainfall to cause the earth to produce ; nor 
can he command the blood to course through his 
veins, nor his food to digest that his physical system 
may be sustained — the latter operations being invol- 
untary. Nature herself furnishes him with these 
essentials to animal life, and these might fail in ef- 
fect, if their action depended upon his own will 
or watchfulness. His desires or wants, that are 
outside or beyond these essentials, ai^e gratified 
only by means of his own exertion or labor in some 
form. 

9. Second General Law — Man does not act without 
motives. 

The strongest of these as to material things arises 



POLITICAL ECONOMY DEFINED. 11 

from the fact that the fruits of labor are recognized 
as exclusively the 2^^02Jerty of the person bestowing 
that labor. This recognition is common among men, 
and is consistent with right and justice to such an 
extent as to be intuitive in the individual. This 
admission carries with it the right of the producer to 
have absolute control of the fruits of his own labor 
so that he may exchange them for something else or 
transfer them to others. 

10. Third General Law. — As mayi advances iyi civili- 
zation his desires become more refined and increase in 
number. 

These desires are consistent with the highest phase 
of living as found in a Christianized civilization. A 
social condition thus constituted is able to appreciate 
the advantages derived from skillful labor and inven- 
tions, both of which are put in requisition to supply 
the physical and intellectual wants of a community 
thus advanced in refinement and taste. Each gener- 
ation requires more to satisfy its desires than did the 
one preceding, and in consequence, the developments 
of practical science and the continually improved 
facilities for promoting industries and education mnst 
keep pace in the future, as they have in the past, with 
these increasing desires. 

11. Fourth General Law. — Tlie ample stores, from 
which man can obtain the m^eans to advance his 
physical comfort, are hidden in the recesses of nature. 

The earth has within its soil elements, that, under 
certain conditions and in connection with the labor 



12 POLITICAL ECONOMY. 

of man, will produce food. Wild berries grow in the 
meadows, and nuts are found in the woods, but they 
must be gathered; the sea abounds in fish, but the}^ 
must be caught. Coal in the mines and iron-ore in 
the vein, with limestone near by, are in theory useless 
until the labor of man is so applied as to bring them 
together in such proportions, that by application of 
heat the dross is driven off and the iron left pure. 

By a law of equity, the cost of production, as a gen- 
eral rule, is so equalized, that a gold dollar in Cali- 
fornia costs as much labor and expense as does a 
dollar's worth of wheat in Dakota, or the same amount 
of value in a factory in one of the old States. A law 
established of old, that, ^^if any will not work neither 
let him eat,^^ is complied with at all times, for even 
the wealth of those who by inheritance have the means 
of living was also obtained by labor at some time and 
somewhere. 

12. The Fifth General Law is that man, being a 
reasoning creature, will not act without a motive, and 
therefore. The incentive to labor originates in his 
self-interest or desire to possess something ivhich he 
values. 

We may conceive of a savage having no desires be- 
yond that of supplying his very limited physical wants, 
and that therefore he would live in absolute idle- 
ness unless forced to exertion by the pangs of hunger 
or some great necessity. The more enlightened the 
people, the more enlarged and varied are their wants 
or desires, and these increase from generation to gen- 



POLITICAL ECONOMY DEFINED. 13 

eration to such a degree, that we often find the use of 
some one article classed as a luxury in one generation, 
which in the next becomes a necessity. For illus- 
tration, ice as now used in the household was within 
half a century ago deemed a luxury, while to-day, 
especially in the cities, the tastes and habits of the 
people demand its use as necessary for their comfort. 
This principle also applies to the numerous other 
wants, that are continually increasing among the 
people as they become more educated and more re- 
fined, and their desires extend outside and far beyond 
the mere wants of their physical nature. To meet 
them the plainest food and the simplest clothing 
might suffice ; but advanced or refined wants require a 
proportionate amount of labor : hence the more civil- 
ized and cultivated a people become, the more diverse 
are the industries demanded to satisfy their desires. 
This advancement is by no means limited to supplying 
the physical wants of the people, for, within the last 
half of the present century, the progress of science in 
revealing the secrets of nature and applying the knowl- 
edge thus obtained has made the education of a 
pupil in a high school of to-day far more extensive in 
some practical forms than was enjoyed by the college 
graduate of the former period. 

13. Education a Promoter of Successful Labor. — It is 

proper in this connection to notice education or mental 
training as an important factor in the efforts to develop 
the resources of our country ; to treat of which comes 
under one of the branches of political economy. Edu- 



14 POLITICAL ECONOMY. 

cation may be termed menial wealth as it is the outcome 
of mental labor, and as sucli deserves recognition by 
American youth who are about to engage in any of the 
mechanic arts or in any profession. In the various kinds 
of human employments, often the scientist, the geolo- 
gist, the metallurgist or the civil engineer, is essential 
for the successful prosecution of labor. How could mere 
unskilled laborers grade railways and put down rails, 
if not under the supervision of competent engineers, 
who direct how and where the track is to be laid ? 
How much would ignorant labor alone accomplish in 
smelting iron ? It might handle the pick and the 
crowbar in quarrying the limestone, in getting out the 
coal and the iron-ore, but science — ^after long years 
spent in experimenting, and in mental labor — directs 
the proper proportions in which the three ingredients 
are to be placed in the furnaces, in order to smelt the 
ore and obtain the iron. 

The man who invented and put in practice the iron 
or steel plough, and thus superseded the cumbersome 
wooden one, did more to promote agriculture than ten 
thousand unskilled farmers toiling in the old method. 
Educated labor does better work than the uneducated. 
The great success that crowned the efforts in spinning 
cotton when first established in New England, was 
owing very much to the general intelligence of the 
native girls who attended the jennies. Their minds 
having been trained in the public schools of that day, 
they were able to master speedily the intricacies of the 
machinery. The rule applies in all similar cases. 
The grand result is brought about by the combination 



POLITICAL ECONOMY DEFINED. 15 

of physical and mental labor; or in other terms, labor 
to be successful must have brains in it, and be directed 
by competent knowledge. Education is, therefore, 
recognized by the thoughtful, as an all important 
factor in perfecting workmanship of whatever form, 
meanwhile adding to the material wealth of individ- 
uals, and thus indirectly promoting the well-being of 
the Nation. 



III. 

WEALTH AND LABOR. 

14 — 20. Political Economy treats of the principles 
in accordance with which material wealth is acquired, 
but by no means is it thus limited, in fact it applies to 
civilized man in all his social relations, inasmuch as 
the knowledge of its truths may teach him how to 
gratify his tastes and desires, and to promote his indi- 
vidual well-being, as well as that of the people at large. 

Wealth Defined. — The term wealth is often used 
in a vague oi* indefinite sense, for instance, when 
restricted to money alone, since the latter is only a 
medium of exchange, and merely represents wealth. 
A greenback calling for one hundred dollars is of 
itself worth only the paper on which it is printed, 
but it represents that amount in the Treasury of the 
United States, and when the owner presents that note 
at the counter of the Treasury he receives its face 
value in gold. 

A railway uses but little money in its transactions in 
business, when compared with the amount of its prop- 
erty or wealth in the road and its equipments. It is 
seen by this illustration, that the term ivealth includes 
the possession of a great variety of special objects, and 



WEALTH AND LABOR. 17 

yet each one is limited in amount ; if it were not so, 
every person could have an abundance, as of air and 
sunshine. On the other hand, the term wealth, 
strictly implies a surplus of the objects or articles 
beyond what is requisite to supply the wants of the 
individual owner, and which surplus if he wills, he 
has the right to transfer to others. From this it 
follows that wealth may be defined as that ivMcli can 
he exchanged, is limited in supjily, and is useful. 

15. Original Source of Wealth. — The benevolent 
Creator has placed within man^s reach in the store- 
liouses of the earth those substances, that when prop- 
erly prepared can add to his comfort and improve- 
ment. Man can neither create a particle of matter 
nor can he destroy it ; he can only change its form 
and,by making combinations of its various properties, 
produce results that become useful and adapted to 
gratify his desires. The Creator has constituted him 
lord of the earth, and endowed him with mental 
capacity to search out the hidden treasures of nature 
and utilize them for his own benefit. He did not 
grant him great physical strength, that he might 
thereby accomplish much in moulding matter, but 
instead He inspired him with intellect, that he might 
investigate the mysterious powers that are hidden in 
nature and by controlling them compel them to do 
his bidding. He can make a combination of saltpetre, 
charcoal and sulphur, which, as gunpowder, enables 
him in the twinkling of an eye, to accomplish more in 
moving masses of rock than he, single-handed, could 



18. POLITICAL ECONOMY. 

do perhaps in months. He brings under control the 
expansive force of steam, and runs the steamship or 
draws the railway train, or drives the complex machin- 
ery of the factory. By means of the inherent force of 
an educated mind, he lays under contribution 
many of the powers of nature — as gravitation, wind, 
electricity, magnetism, and perhaps, in the future 
he will utilize other forces not yet discovered. 
He lays claim to the ores of numerous metals 
and seams of coal deposited within the recesses 
of the earth ; his knowledge enables him to cultivate 
the soil properly and nature smiles upon his efforts 
and produces abundant crops. 

16. Why Wealth Increases. — The wants and desires 
of civilized man are ever increasing and always 
recurring, and thus they cause a steady reproduction 
of the commodities by which they are satisfied. In 
that case the latter are themselves consumed and the 
process of production and consumption, goes on con- 
tinually. The man who by his labor barely earns a 
support, cannot be deemed wealthy, but when he 
accumulates a surplus beyond these necessities, and by 
frugality, temperance and prudence lays it up in store 
for future use — thus far he is wealthy. To accomplish 
this requires well-directed labor ; it may be physical or 
mental or possibly both, and it also requires the habit 
of saving — the latter virtue must neither be over- 
looked nor practically ignored. In proportion to the 
facilities properly utilized, by individuals or commu- 
nities, wealth increases. 



WEALTH AND LABOR, 19 

Man has every encouragement to labor in hope of a 
fair remuneration on the part of nature. She is not 
stingy but bountiful in her gifts, and the more she is 
caressed the more loving she becomes. The materials 
that are useful for man's comfort and prosperity are 
in her keeping, and the only condition imposed is 
that he makes these treasures available by his own 
exertions. Industry, connected with a proper spirit of 
economy, in order to meet the wants of the future, is 
found among civilized nations alone. Savages provide 
for the passing moment only, and among them, 
wealth in a comparative sense has no existence. 

Man's Labor TTnlimited. — The civilized man is con- 
stantly acquiring tastes that are far-reaching in their 
influence, and to satisfy them, labor is essential, and 
that sometimes even in distant portions of the world; 
and yet this labor, by a universal laiv, demands compen- 
sation, which must be by means of labor. For illustra- 
tion, the American farmer prepares the ground, sows the 
wheat, harvests the crop, from which the miller manu- 
factures ihe flour, and the merchant ships the latter to 
Brazil to exchange for rubber or coffee, which is 
equally the result of labor. Numerous commodities — 
the product of labor — go from the United States to 
China to exchange for tea, to Cuba for sugar, to Cen- 
tral America for chocolate, or to the East Indies for 
spices, or to the countries of Europe for manufactured 
articles — thus labor goes on the world over. This is 
in consequence of the desires or tastes of the civilized 
man taking in so wide a range. He finds that certain 



20 POLITICAL ECONOMT. 

elements in the food that is produced in foreign 
lands are beneficial to his physical system and condu- 
cive to his health and comfort, therefore, to furnish 
his breakfast or dinner table, far separated portions of 
the world are made to contribute. It follows from 
this general law, that the most refined and cultivated 
people require to supply their numerous desires the 
diversified labor of a large number of persons in differ- 
ent lands. These desires are often characterized as 
being artificial, and they may be in a certain measure, 
but they are none the less prevalent in all civilized 
society; and instead of diminishing, they are in- 
creasing from generation to generation. These refined 
tastes and desires are not injurious, while each one 
serves to link the nations of the earth in mutual 
good-will, though it may be only commercial. 

17. Labor Honorable for All. — Neither will the race 
deteriorate because of its rising to this higher 
plane of culture, to which allusion has been made, as 
with it is connected and taught a practical knowledge 
of man's physical nature and the laws of health. 
There are distinct indications that in the main, the 
intelligent portions of the people of the United States 
are gradually improving in their physical constitution. 
Strictly speaking we have no leisure class, for the vast 
majority are engaged in the active duties of life, 
which are so conducive to health; the wife superin- 
tending the household affairs of the family, and the 
husband the routine of business of whatever kind in 
which he may be engaged. It is contrary to reason that 



WEALTH AND LABOR. 21 

the increased knowledge of to-day, as compared with 
the past, and its continual development in the future, 
would not be applied in promoting the physical health 
of American youth, as well as in their progress in the 
cultivation of the accomplishments that are in 
accordance with moral worth and intellectual acquire- 
ments. The gradual elevation of character from one 
generation to another is promoted, because the 
immense majority of the American population are 
engaged in some legitimate and honorable occupation. 
Political economy is used in one of its appropriate 
spheres, when it treats of the education of youth in 
respect to the preservation of health and vigor, while 
it encourages individual industry. 

18. The Essential Value of Labor. — A little reflec- 
tion will show the immense amount of diversified 
labor, unskilled and skilled, that is required to pre- 
pare for use the elementary productions of nature. 
For illustration, take the common nail, the simplest 
form in which the carpenter uses iron or steel in his 
work, and trace it from the crude ore imbedded in the 
vein ; note the smelting ; the preparing of the metal 
and the process of passing it through the machine, as 
it is being made ready for use. His hammer needs 
still more preparation than the nail, and so does the 
cutter in his plane. The latter must be made of iron 
purified into steel, and so hardened that it will carry 
an edge ; and his saw must not only cut well, but be 
very elastic. In a similar manner are the tools of 
other mechanics and artisans prepared, and though 



22 POLITICAL ECONOMY. 

under different processes, they are all as essential in 
accomplishing the final result, as is the labor of the 
workman who gives the finishing touches. The pupils 
would do well to use other illustrations, and trace for 
themselves the preparation of the materials brought 
into requisition, as for instance in the building of a 
house ; the stone from the quarry ; the brick from the 
clay ; the lime from the limestone ; the timber from 
the forest ; the glass from the sand, and the paint, 
composed of ingredients from different sources, but of 
dissimilar qualities — all the outcome of labor. Time 
fails, nor is it essential — as the pupil can illustrate the 
subject for himself — to describe the numberless imple- 
ments that must be properly made before they can be 
used practically, from the most delicate needle or sur- 
gical instrument to the enormous shaft of the ocean- 
going steamer. 

19. Labor that is Unproductive. — While labor is 
shown to be essential for success in producing 
good results, yet it is often misdirected and fails in 
benefiting mankind ; for instance, persons labor to 
become artists, painters or musicians, when a little 
investigation would discover, that the gifts of nature 
had not fitted them for that sphere of usefulness. 
But what shall be said of those whose labor is posi- 
tively injurious ? those who are devoted to gambling 
in its various forms, such as at the faro-table, the 
pool-room and in the stock-exchange, as sometimes 
conducted, thus acquiring property without giving an 
equivalent, subverting the laws of equity and justice. 



WE A L TH A ND LABOR. 23 

not to speak of thieves, counterfeiters and swindlers. 
Still more harmful is that class of labor which panders 
to vices that disqualify men for honest work, and 
cater to the depraved appetites which demand intox- 
icating drinks. This entire class add nothing to the 
sum of property, but indirectly diminish it by demor- 
alizing men and making them the slaves of their 
animal passions, and thereby impairing the general 
industry of the community. 

20. Labor Influenced by the Demand. — The classes 
of labor, such as those of the farmer and gar- 
dener, that supply substantial food for the people, 
scarcely diminish but rather increase in proportion to 
the increase of the population ; and as the different 
kinds of food for man's sustenance do not cease to be 
required, neither will cease the labor connected with 
transportation of the food to the consumers. Iji this 
class is also included the labor connected with the 
manufacture of textile fabrics, useful for clothing, 
as the amount needed is subject to little variation, 
because of the continual demand. On the contrary, 
in the manufacture of fancy but not essential articles, 
there is often a fluctuation of labor, which is governed 
by an increased demand growing out of the whims of 
fashion ; a certain style of dress may for a season 
induce an unusual amount of labor in supplying the 
ftiarket. For illustration, at one time a few years 
since, numbers of factories were running at full 
power in turning out a peculiarly-shaped steel wire, 
used in making ^Mioop-skirts" for ladies' wear. That 



24 POLITICAL ECONOMY. 

form of labor has virtually disappeared, because the 
fashion has changed, perhaps to reappear in the next 
generation. Other instances might be cited in which 
the manufacture of articles dependent for their use 
upon such whims has been also discontinued. The 
main stimulus for labor is in the demand for its 
products, especially when they are essential for the 
sustenance and comfort of man, as his desires for sub- 
stantial food and clothing remain virtually the same 
in accordance with his physical nature. 



IV. 

VALUE. 

21 — 25. Two Definitions of Value. — The meaning 
of value as applied in general terms to an object, 
is often not sufficiently precise, yet it can have 
ttuo special definitions. The first, excJimige- value or 
pur chasing -2:)0iuer — that is, what it commands for itself. 
It is used in political economy i7i this sense alo7ie. For 
instance, a gold dollar can purchase or obtain in 
exchange for itself a certain amount of wheat, or so 
much calico. The second is value that is based 
upon usefulness; for illustration, gold, pound for 
pound, has greater exchange-value than iron, but 
the usefulness to man of the latter metal far tran- 
scends that of the former. The gold of the world 
could be annihilated, and yet the loss to civilized man 
would be as nothing, compared with his loss if iron 
were blotted out. If gold were even as abundant as 
iron, its nature forbids its being used in machinery 
like iron or steel ; by no possible means could it be 
utilized where great strength is required, as in the 
shaft of an ocean-going steamer ; equally useless 
would it be if made into edged tools. 

22. Value a Relative Term. — That is, value is 



26 POLITICAL ECONOMY. 

compared with something else for which it can be 
exchanged. But in process of time,, practical useful- 
ness and experience taught civilized men in their 
exchanges with one another, to agree upon some 
one article as the standard of value, and in using that 
as a basis, the value of other articles could then be 
estimated by comparison. Thus gold, the most pre- 
cious metal, has been under ordinary circumstances, 
adopted as that standard. When that metal was 
discovered in California, (1848) and afterward supplied 
abundantly to the commercial world, prices of all com- 
modities were enhanced. This was not in consequence 
of a deficiency in the latter, but because of the extra 
amount of gold — the standard of value — which had 
been thrown upon the market. Yet men always speak 
of the gold dollar in the form of money, as that stand- 
ard, and ignore that it may be cheaper than usual 
because of its abundance, or dearer because of its 
scarcity, but instead, speak only of the increased or 
diminished prices of other commodities. 

The value of an article may be greatly enhanced by 
circumstances. An individual may be in such a con- 
dition, because of the pressure of hunger, that he 
would give many times the usual price for a loaf of 
bread. In ordinary business, however, values are 
increased or diminished by various causes ; as the fail- 
ure of crops, or their unusually heavy production ; 
expansion of the currency, or by the influence of spec- 
ulation — an abnormal and injurious condition — imposed 
upon the exchange of values by selfish men. The 
highest value of the article is based upon the desire of 



VALUE. 27 

the purchaser to possess it — that article may be a 
diamond^ and the purchaser values the precious stone 
more than the ten thousand dollars he exchanges for it. 

23. Service for Service. — The practical estimate 
of exchange-value is based on service for service — 
that is, on the products of different kinds of labor. To 
produce value is the work of man ; the Creator sup- 
plies only the conditions, which of themselves have no 
exchange-value, they being the gratuitous gift of God 
to his creatures ; the air they breathe, electricity, 
magnetism, the sunshine and the rainfall ; the prop- 
erties of iron and other metals ; the spontaneous 
fruits of the earth, and otlier gifts, innumerable. 
The creation of the excha7ige- value of any one of these 
gifts that is susceptible of being thus utilized is the 
result of man^s own exertions. . When men use these 
results to satisfy their desires, they exchange them 
among themselves, the base of the exchange being the 
mutual agreement upon the exchange-value of each 
oner's property, and for the time being the articles, 
wiiatever they may be, are deemed of equal exchange- 
value or purchasing-power. They may both be value 
in the form of merchandise, or one may be value in 
the form of money, but when traced to the original 
basis, they both as an ultimate result, represent service 
for service. The one value may be a thousand gold 
dollars, which with much labor has been extracted 
from gold-bearing quartz in California ; the other 
value may be hair-springs for watches, which by 
means of numerous manipulations have been changed 



28 POLITICAL ECONOMY. 

into their present form from the crude iron-ore taken 
from a mine in Pennsylvania. Yet each has the same 
exchange-value or purchasing-power. The term value 
is not limited to material things alone ; the skill of the 
physician, or the education of the theologian, or the 
legal acquirements of the lawyer, or the mathematical 
knowledge of the civil engineer, has value that is 
exchanged on the principle of service for service, as 
well as material things. Value in commerce, Prof. 
Perry (p. 126) defines as: *'The relation of mutual 
purchase established between two services by their 
exchange.^' 

24. Value and Price Compared. — In intimate con- 
nection with value is price — the latter expresses 
the purchasing-power in money or value of any- 
thing salable. Thus when we speak of the price of 
an article, we mean the sum of money which that article 
commands. The two terms are not quite the same in 
meaning : a purchaser may value an article higher 
than the price he pays for it, or the reverse. But in 
practical life, value is reckoned almost the same as 
price — that is, so much in money — and by means of the 
latter as a standard, the value of the various commod- 
ities in the market may be ascertained and relatively 
compared. Prices may rise or fall, as for instance 
upon the influx of gold, already noted, but a bushel of 
wheat, no matter what the price paid for it, has the 
same inherent value in gratifying desire. The highest 
value an article attains is the result of its utility or 
usefulness. Personal desires vary according to the 



VALUE. 29 

taste or necessity of the individual, and their in- 
tensity is manifested by the price the latter is will- 
ing to pay. On the other hand, the value is lowest 
when the article lacks usefulness, or it may be because 
of the great expense of labor in jDroducing it ; the cost 
thus being so great, as to more than counterbalance 
the utility. 

25. Supply and Demand. — Between these extremes 
just noted, are great fluctuations of prices or values, 
and these are caused by the supply and demand. 
When there is an abundant supply of any commod- 
ity in the market, the price is proportionately lower ; 
and, as a general rule, when there is a great demand 
the price is increased in proportion. This induces 
in trade or commerce a continual interchange of val- 
ues in articles salable. The influence of prices is felt 
more in relation to the necessaries of life when they 
are the subjects of supply and demand ; essentials, 
such as food and clothing men must have, while mere 
luxuries for the time can be discarded. It may be 
I'emarked that those industries that pertain to the 
cultivation of the mind, such as the outlay in affording 
instruction to pupils or in the purchase of books, are 
unfortunately the first to feel the effect of depressions 
in business transactions. 

This continual variation in supply and demand, and 
consequently in values or prices, stimulates industries 
of the various kinds. There would be but little inter- 
est in trade and commerce if prices never varied year 
in and year out, and the supply was known to be pre- 



30 POLITICAL ECONOMY. 

cisely equal to the demand — such monotony would 
dampen not only the spirit of industry, but of trade or 
the distribution of the results of industry to the con- 
sumers. Money^ gold and silver^ or their representa- 
tives, bank-bills, being recognized and used nominally 
as the measuring standard, does not change its value ; 
yet in either form it does virtually, when a super- 
abundance of it is thrown upon the market. Under 
such circumstances the temptation is great for mere 
speculators, outside the legitimate trade, to force 
prices or values up or down in accordance with their 
own selfish aims. 

EiFect of Competition. — Competition, as a general 
rule, prevents such extortion, and regulates prices, 
bringing the latter into accordance with the demand, 
so that for the most part, especially in the United 
States, monopolies cannot last long, for though 
successful for a time, competitors will soon be in the 
field, and will lower the price of the article, if consist- 
ent with the cost of production, to the advantage 
frequently of both parties. An illustration: Years 
since, a line of stages, virtually a monopoly, ran on a 
certain route in the city of New York ; a new line was 
put on the same route or nearly so, and charged only 
six and a quarter cents, just one-half the price 
demanded by the first line ; the latter was forced to 
lower its price to that of the competitor, and in conse- 
quence both lines ran full nearly all the time, and 
each made more money than the original line, while 
the public was fully accommodated and greatly bene- 



VALUE. 31 

fited. In time^ to the great advantage of the public, 
both lines were superseded by the present system of 
street railways. 

Political economy treats only of general principles 
that can be made available in remedying the evil of 
prices being unreasonably high in proportion to the 
cost of the production of the numerous commodities 
thus affected. Under usual circumstances, compe- 
tition is a quiet but an effective regulator of prices. 
There may be, however, certain conditions, as when 
concentrated capital obtains control of the entire out- 
put of a natural product which is essential for the 
comfort of the people ; or when railway or telegraph 
companies combine in such manner as to become virtu- 
ally monopolies, which can be made detrimental to 
the interests of the people at large ; against such 
combinations ordinary competition has no power. 
The only remedy for these evils is to be found in wise 
and equable legislation. 



V. 

THE FOUR DIVISION'S. 

26-39. Political Economy, in the main, compre- 
hends four divisions — two Primary and two Secondary. 
The First includes production and consumption : The 
Second, distribution and exchange. The latter two 
could not exist without the former, hence they are 
subordinate. We have seen that man can neither 
create nor destroy matter ; he can only so modify the 
Creator's gifts in the form of natural resources, as to 
make them available for his own use. The iron-ore 
and coal have no utility, while lying in the mine ; 
neither has the gold-bearing quartz ; nor has the silk 
cocoon ; nor the cotton-ball in their native state :— 
it is only when they have been manipulated by man's 
labor that they can gratify human desires. Almost 
innumerable forms of men's skill and labor occupy the 
great field of the various industries, and thus 
develop the gifts and resources of nature and from 
them create value. The general result of such processes 
is termed prodtiction. When these productions are used 
by man to supply his wants, and they perish in the 
using, as does a barrel of flour when it supplies bread 
to the eater, it is called consumption — that is the 
ultimate result, and for that purpose was each article 



TH:E 'FOUR DIVISIONS. 33 

made. Thus there is an uuendiiig succession of pro- 
ductions, the outcome of industry, to gratify man^s ever- 
recurring wants. This natural order will ever con- 
tinue. The destruction of the results of man's 
industry is abnormal, when it is caused by fire or flood 
or by any untoward circumstances. It is simply a loss, 
and the design in producing the article is frustrated 
by misfortune. 

27. Distribution and Exchange. — The articles cre- 
ated by the exertions of men would be of little avail, 
were they not supplied to the consumers. This 
form of labor is termed distribution. The process of 
supplying the wants of the consumers is quite complex, 
as it utilizes all the facilities pertaining to trans- 
portation. In intimate connection with distribution 
is exchange, by which one production that is deemed an 
equivalent in value, is given for another — it may be an 
article the result of labor by the individual, or it may 
be in the form of money. Civilized men by means of 
their personal labor supply but few of their own wants. 
A person while creating only one article requires for 
himself an almost unlimited number of other articles. 
By means of practice he acquires skill, and can pro- 
duce a certain value better than he can any other ; for 
instance, the shoemaker can make more and better 
shoes than the carpenter, and the latter can make 
greater values out of wood than the former. Thus go 
on the ever-recurring wants of man, and also the con- 
tinuous labor to supply them; but of the multitudes 
employed, each person consumes very little of the value 



34 POLITICAL ECONOMY. 

he himself has created ; and thougli his wants are 
supplied by others, he still continues to labor in his 
own special line, that he may have values to exchange 
for those that are adapted to satisfy his own desires. 
Thus in the order of things, both parties, the producer 
and the consumer, must labor to secure the means by 
which they can make exchanges and supply their 
wants. 

28. Labor. — We have already noticed that labor 
is honorable in all, and essential to secure the blessings 
that lie hidden in the resources of earth. We come 
now to speak of the modes of labor used in trans- 
forming these treasures of nature in such manner that 
men can utilize them for their own benefit. Herein 
we recognize the wisdom of the Creator in giving man 
intellect, that he may devise means to lay under con- 
tribution the powers of nature and make them subserve 
his will. He thus produces modifications of the 
crude materials so as to render them capable of enhanc- 
ing the well-being and progress of the people, and 
leading them to a higher plane of education and 
welfare. 

29. Man's Directive Power. — We apply the term 
labor to man^s voluntary efforts to change the 
form of the materials which nature has provided, 
in order to use them for his own benefit. In general 
terms, we speak of man's labor ; as all these changes 
are made either through his individual exertions or 
under his direction, as when he commands the powers 



THE FOUR DIVISIONS. 35 

of nature to do his bidding. He first, no doubt, 
availed himself of the strength of domestic animals, 
and as he became more experienced, he used the weight 
or gravitation of water to turn wheels and move 
simple machinery ; then the winds of heaven to propel 
his crude boat, and in time when he became more 
enlightened and learned of the less obvious forces of 
nature, he utilized that of steam, and afterward 
that of electricity and magnetism. In the storehouse 
of nature there may be more forces yet to be dis- 
covered and utilized in numerous ways, that are now 
to us incomprehensible. 

The multiform productions of every kind and grade, 
that are the results of the application of the several pow- 
ers of nature, are as truly man^s as if he accomplished 
them by means of his own physical labor, because, 
without the intervention of his genius and will and 
perseverance in discovering the properties of these 
materials, and combining them to accomplish the 
desired purpose, there could have been no such result; 
and thus far the credit is due alone to man^s exertions. 

The Creator supplies the conditions ; bestows upon 
man intellect, and the susceptibility of cultivating its 
powers. He enables him to appreciate beauty and 
improve his taste ; He has given him a moral and 
spiritual nature, that' he may aspire to something 
divine, and beyond the simple material, and He en- 
courages him by crowning his labors with success, 

30. Mental Wealth. — Advanced culture and refine- 
ment by no means diminishes the necessity for 



36 POLITICAL ECONOMY. 

labor. The improvement of the mind must be 
acquired by means of the exertion of the iiidividual 
himself, though he can make great progress by utilizing 
the experience of those competent to teach. Thus it 
is ordered that the most important acquisition of the 
cultivated man or woman cannot be bought — it is too 
valuable for that. The culture of the human soul — 
intellectually and morally — God has ordained must be 
acquired by the exertions of the individual alone. 
The best aid he can obtain is only directive; the 
intellect must act independently ; and as the body, to 
sustain itself, must assimilate the proper food, so the 
mind must assimilate the truths presented — 
whether intellectual, moral or aesthetic. By no other 
process is this wealth of the soul to be acquired ; and 
this mode is consistent with the plan adopted by the 
Creator in aiding man ; that is, supplying condi- 
tions, and demanding him to act for himself — to give 
him nothing that he can acquire by his own exertions. 

31. The Training of Mankind. — Nature, however, 
does innumerable things for man that he cannot 
do, but none that he can do for himself. Therein 
consists the wonderful training by means of which 
the Creator develops character in mankind. Learn- 
ing how to apply the primitive forces of nature, even 
to a very limited extent, took a long time during 
the early ages of the race. One ap|)lication of force 
would suggest another, and the progress, though com- 
paratively slow, and to us of this day defective, would 
not be much in advance of the general intelligence of 



THE FOUR DIVISIONS. 37 

the people of those primitive times, though every 
movement in using the powers of nature, and making 
them do the bidding of man, had the effect of elevat- 
ing the people at large to a higher plane of knowledge 
and appreciation of comfort. 

32. Few Inventors.— The number of original in- 
ventors, compared with that of the civilized portion 
of the race, is exceedingly limited ; not one perhaps in 
ten thousand, yet in the course of time, the people 
learn to use and profit by these inventions. From the 
first, this process has been going on ; but how slowly ! 
yet no faster than the knowledge of the great mass of 
the people enabled them to appreciate the special 
advantages thus brought within their reach. Suppose 
the power of steam had been discovered a thousand 
years before it was, the lack of knowledge among the 
people to make the steam-engine to utilize it, would 
have rendered the discovery valueless. It is evident 
that all classes of knowledge and inventions must 
advance together and at an equal rate, in order that 
the improvements made by the few may be utilized by 
the many. Notwithstanding the multiplicity of labor- 
saving machinery of our own times, there appears to 
be as much necessity for labor as ever, though its form 
has been somewhat changed, and time taken to adjust 
it to the new conditions. The machine that in a few 
minutes sews together the parts of a shoe or of a dress 
must be carefully attended, though it accomplishes 
much more in a given time than can be done by hand. 
In the general result there is no more room for idle- 



38 POLITICAL ECONOMY. 

ness to-day than there was before the advent of so 
much labor-saving machinery. 

33. The Extension of Knowledge. — These improve- 
ments are by no means limited to mechanical 
machines, for in the course of the education of youth, 
science, within the last half century, has made kiiown 
numerous branches of knowledge, some acquaintance 
with which is essential to a symmetrical educa- 
tion. In consequence, the time required to complete 
the pupil's course of study has been extended in the 
same proportion. There has been meanwhile as 
much improvement in the preparation of school-books, 
and in the methods of giving instruction, within the 
last half century, as there has been in the modes of 
conducting the various industries. We have, there- 
fore, a partial view of the advancement of the Amer- 
ican people, during the period just mentioned, if we 
take into consideration only their remarkable material 
prosperity. Their progress toward a higher plane of 
mental and moral improvement, has been equally 
great, if not greater. The intellectual stimulus, that 
has its origin in the common schools, does not relax 
its power, but continues to influence the minds of the 
people, and promote their culture ; while the benign 
spirit of Christianity aids in the moral elevation of 
their character. Notwithstanding these advantages, 
there is one phase of acquiring an education that 
even good books and good methods of instruction can 
reach only indirectly — the training of the mind, by 
far the most important of all. The book, and the 



THE FOUR DIVISIONS. 39 

instructor, can only be directive ; the mental power of 
the pupil must act for itself. The essence of an edu- 
cation, therefore, consists in so training the mind 
that it ccDi do its oivn tlmiking. 

34. Mind Supplemented by Nature.— We see that 
man^s mere physical strengtli avails comparatively 
little in the great advance of mechanical indus- 
tries, but nature, ever bounteous in lier gifts, 
aids him effectively, and his labor would be futile 
without her supplying conditions. Take the example 
of the blacksmith, whose physical strength is suffi- 
cient for the special work he has to do. The piece of 
iron that he wishes to form into a horseshoe, has in 
itself elements — the gifts of nature — which enable him 
to accomplish the end. The iron is tenacious, is 
malleable and can be welded under certain co7iditions ; 
the carbon in the requisite coal lies dormant, but the 
smith applies fire and the carbon ignites ; by means of 
bellows he forces in the air, the oxygen of which 
unites with the carbon and produces a heat sufficient 
to soften the iron, and the smith by means of his 
muscles in action is able to wield the hammer, and 
thus using his skill and physical exertion, he manip- 
ulates the piece of iron and turns it out as he 
designed— a horseshoe. But this result required both 
his mental and physical strength to be exercised ; man 
thus adjusting the materials, and the powers of a gen- 
erous nature produces the desired result. The farmer 
places the seed in the ground, not at random, but 
under certain conditions, which by mental effort he 



40 POLITICAL ECONOMY, 

has learned to be congenial. The seed has within it 
a vital force, but lying dormant until the vivifying 
power in the soil and the sunshine gives it life, and it 
springs forth as a root-stem ; then the blades and leaf, 
the flower and the fruit. The pupil would do well to 
take other instances and illustrate for himself. 

35. Kesults of Mental Labor. — As the human race 
advances in civilization the facilities for exer- 
cising their mental powers increase, as seen in the 
numerous inventions of various kinds, while their 
energy is by no means limited in other fields of 
thought. The chemist in his laboratory discovers 
certain elements in the combination of which results 
are often produced of very great value to the people at 
large. Sir Humphrey Davy reasoning on the power of 
iron to conduct heat, inferred that a lighted lamp, 
which was encircled by a frame of gauze-wire, could 
be used by the miners amid the explosive gasses 
within the coalmine. He reasoned that the wire, 
though hot from the gas burning within the frame, 
would carry off so much of the heat, that there would* 
not be sufficient remaining to ignite the outside gas 
and cause an explosion. The outcome of his reason- 
ing was the invention of the famous '''safety lamp.^' 
This is said to be the only invention with which an 
accidental discovery had nothiag to do. 

36. Inventions. — The discoveries of Edison, in 
our own day, have had an immense influence, in add- 
ing greatly to the comfort and welfare of the peo- 



THE FOUB DIVISIONS. 41 

pie ; so have the inventions of Eobert Fulton, and 
George Stephenson — the one in relation to steamboats 
and ocean-going steamers, and the other to railways. 
To these may be added the sewing machine and the 
more recent improvements in the printing press. 
These several inventors have been great benefactors to 
the race, and to their names might be added hun- 
dreds of others, even if not in fields so extensive. At 
this day mere physical labor is exceedingly limited, 
when compared with the vast amount that is con- 
stantly being done by means of man^s control over the 
powers of nature. It is well to note, that the knowl- 
edge of using to the best advantage this delegated 
authority over nature, has been the outgrowth of 
years in quiet but toilsome study on the part of math- 
ematicians and scientists. To the former we can trace 
the grading and building of railways ; their studies of 
lines and angles and problems of quantities and num- 
bers, enable the engineers to direct the pathway of 
railroads across the country, over valleys by causeways, 
bridging rivers, or tunnelling hills and mountains. 
This patient and accurate mental labor confers upon 
civilized man innumerable other blessings — witness 
the engineering skili and labor in supplying our cities 
with water, or, as seen in the machinery, so effective in 
relieving the manual toil of multitudes, and in numer- 
ous other ways adding to the happiness and comfort of 
the people. Under a similar division is included the 
mental labor of the chemist, who reveals so many of 
the secrets of nature's chemistry, and applies his 
knowledge for the benefit of man ; the same may be 



42 POLITICAL ECONOMY. 

said of the geologist, but in ways not, perhaps, so 
obvious. 

37. An Incident. — Uneducated people undervalue 
mental labor, but they can appreciate its results. 
Tradition tells of a hard-working, plodding farmer 
who was continually twitting the son of a neighbor, 
because of what he termed the latter^s laziness — 
saying, ^^ Why don't you love work; to hoe corn or 
do something ? '' The boy replied he had no taste for 
that kind of work ; he ^Mvould rather make drawings 
and new things." The boy left the neighborhood; 
but years afterward, he met the farmer. The ac- 
quaintance being renewed, the latter wished to know 
how he had succeeded m doing nothing. The young 
man parried the question; but casually remarked that he 
supposed his friend still used the heavy old-fashioned 
plow with its cumbersome wooden moldboard. '^ Oh 
no! " briskly answered the farmer, ^'^I use a plow much 
lighter and with an iron moldboard ; and that plow 
does more than twice as much work as did the old 
one, and tires the horses not half so much." The 
young man remarked, '^I invented that plow." 

38. Natural Agents. — Man commands many natural 
agents to do his work. These are divided into two 
classes — the animate and the inanimate. The former 
was more essential for man's use and comfort in the 
past than at the present, as in modern times their 
labor has been in a great measure superseded by other 
forces. Till within seventy-five years of the present 
time, with the exception of sailing vessels and boats 



THE FOUR DIVISIONS. 43 

floating on the rivers, all transportation and travel was 
conducted by the strength of animals. In our day, 
what a contrast we see in the immense trains on our 
railways^ drawn by an inanimate power — steam. While 
some are loaded with the products of the farmer and 
the manufacturer, others are carrying multitudes of 
passengers, and moving at a rapid rate day and night. 
Previous to this in our own land the horse, the ox 
and the mule were used, they answering for nearly all 
the purposes required. The expense of feeding and 
sheltering these animals was comparatively small, as 
for the most part, they lived upon the sjiontaneous 
productions of the earth. But notwithstanding rail- 
roads traverse our whole land and steamboats navigate 
our waters, we cannot altogether dispense with the 
assistance of these animate forces. The farmer, as a 
general rule, in his occupation of cultivating the soil, 
avails himself of the strength of these animals more 
thaii any other power. In truth, their labor will never 
be entirely superseded as long as there are cases where 
no other force can be made available. It is said, 
that, although steam power has been so much intro- 
duced, the use of the horse in many respects has not 
been much diminished. 

39. Inanimate Power.— How limited is the animate 
power when compared with the inanimate ! For illus- 
tration, the weight of water turning the mill-wheel ; 
the wind in driving the ship, or in doing other work ; 
and the expansive force of steam — all these man has 
under his control. There are of course liabilities inci- 



44 POLITICAL ECONOMY. 

dent to these forces — the waters may overflow or be 
subject to a deficiency ; the wind may be variable, 
sometimes lacking and at others violent ; while acci- 
dents may occur with steam, though upon the whole 
it is the most reliable and the easiest to manage, yet it is 
the most expensive when we take into consideration the 
cost of the machinery adapted to utilize it, and that 
of the fuel and the supervision required. 

The extremes in power and in accurate work, that are 
attained by the steam engine, are marvelous. It can 
with equal ease drive an enormous ship through the 
waves and storm, or draw a train carrying thousands 
and thousands of tons ; it can also punch an eye in the 
head of a needle, or make a screw for a Waltham 
watch so tiny that the threads are almost invisible to 
the naked eye, or weave a given human countenance 
in silk. Man's intellect has adjusted the machines to 
accomplish these ends — the one class strong in com- 
bined plates and bars and bolts of steel ; the other 
with combinations of slender pieces, that seem almost 
instinct with life and mental power, as they perform 
tlie delicate operations. These all, with many others 
of similiar character, aid in enhancing the happiness 
and comfort of civilized man. 



VI. 

THE THREE liN'DUSTRIES. 

40-42. — The material products of the industries of 
man consist of three divisions — the agricultural, the 
commercial and the mechanical. These are intimately 
related and dependent upon one another in conferring 
benefits upon the race, especially on that portion 
that is civilized and enlightened. There is a far 
greater number of persons in our country engaged in 
agriculture than in any other special employment, as 
for obvious reasons, the well-being of the American 
people depends much upon that form of industry — the 
cultivation of the soil. The conditions under which 
that class of labor is performed, will always require an 
unusually large number of individuals, as the work is 
little susceptible of being relieved by the introduction 
of machinery, except in a limited measure. The 
farmer of to-day has his cultivator, his steel plow and 
his steel forks and hoes, and many other implements 
that are immense improvements upon the cumbersome 
ones of the last half century — yet all these must be 
handled by the individual. In harvesting his wheat 
and hay, he is greatly aided by machinery, and also 
in threshing out the former and in shelling his 
corn. 



46 POLITICAL ECONOMY. 

The farmer must wait upon the seasons : he labors in 
preparing the soil and in putting in the seed, and 
then, with unremitting care tends his growing crops 
till they are matured. Owing to these conditions 
there is little room for division of labor similar to 
that which obtains so much in other industries, and 
the facilities thus afforded the latter, are denied the 
farmer — he must labor or superintend in all the 
departments of his special industry. He has compen- 
sation, however, in being engaged in a health produc- 
ing employment, and upon the whole one of the most 
independent, if not as remunerative as some others ; 
and one that should be promotive of good morals in 
consequence of its being subject to fewer temptations 
to evil. During a certain portion of the year, from 
the nature of his employment, he must labor most 
diligently, while at another he has leisure that does 
not interfere with his profits, and during which he 
can have recourse to self-improvement in various 
ways. 

It appears essential in the order of Divine Provi- 
dence, that in providing sustenance for man and his 
domestic animals, a very large proportion of those who 
labor in material things must be engaged in agricul- 
ture. The only food man receives, besides what the 
surface of the dry land produces, is derived from the 
waters, but the amount of such food is comparatively 
insignificant. The fishes and other marine creatures 
that furnish him food, feed directly or indirectly 
upon the sea-weeds and the grasses that grow upon 
the earth at the bottom of the ocean, the lakes and 



THE THREE INDUSTBIES. 47 

the rivers, so that the entire sustenance of man is 
derived from the productions of the eartli itself. 

41. Transportation. — The material products of 
man's labor would be of little avail, if there were not 
means to transport them to the consumer. The 
farmers in the Northwest would value but little their 
surplusage of wheat, if they had no facilities for send- 
ing it to exchange for other commodities which they 
need for their families. In a similar manner the 
manufacturers in the East would deem the products 
of their mills of small value, unless they could send 
them to exchange for the wheat of the Western farmer. 
This illustrates the princi^^le of exchange, by which 
all parties are benefited, and which is accomplished by 
means of the transportation of commodities from one 
place to another, near or remote ; the expense of which 
in some cases, as in that of coal, comprises nearly 
all the cost, since it is comparatively very cheap at the 
mouth of the mine. 

The means of transportation at one time were limited 
to the hands or the back of the individual, or to 
the strength of animals attached to cumbersome 
wagons, or if waterways were used, to the little boat 
or the small sailing vessel. The contrast is almost 
inconceivable, when we compare the primitive mode 
of making exchanges with that of to-day; with 
the numerous railway trains, enormously loaded and 
moving rapidly day and night without a sense of 
weariness. Instead of the original flat-boat on our 
western rivers, that could float only down the stream. 



48 POLITICAL ECONOMY. 

we have the large steamboat, that can pass up or down 
at the will of man,, and in addition the great ocean- 
going steamers, as well as immense sailing vessels, 
both classes carrying enormous cargoes — all to make 
exchanges throughout the world of the products of the 
labor of man. 

42. Commercial Industry. — This phase of labor 
employs in its various relations a vast number of 
persons, who bring to the consumers not only the 
products of the agriculturist, but also those of the 
manufacturer, in order to supply the wants of people, 
often far separated in the Union, and even in foreign 
lands. The crowning result may properly be termed 
exchange, by which is meant, the reciprocal giving of 
the products of the labor of one person, or class of per- 
sons, for those of another. For instance, the merchant 
sends a bale of Merrimac prints or cloths to China to 
exchange for tea or raw silk. It is plain that the tea 
of China could not reach the consumer in the United 
States, nor the former receive the Merrimac prints, 
unless by means of the industry of the sea-captain and 
his sailors, and also that the latter could not traverse 
the ocean, unless the shipbuilder had furnished him a 
ship, and the rigger fitted it out, so that it could be 
used in thus carrying on commerce. Notice how 
much labor is involved in this phase of industry, the 
numerous classes of workmen ; the miners, iron- 
makers, wood-cutters, and carpenters ; growers of 
hemp and weavers of sail-cloth ; the makers of sails 
with their adjustment ; to these is necessarily added 



THE THBEE INDUSTRIES. 49 

the quiet mathematician, who has exercised his men- 
tal power in calculating the nautical tables, while 
mechanics of more refined skill make the compass and 
the chronometer, by consulting which the shipmaster 
is able to reach China and return. 



VII. 

DIVISIOI^ OP LABOR. 

43. — 48. — In manufacturing there are numerous com- 
ponent parts of the articles made, each one of which 
must be prepared separately, as for instance the differ- 
ent pieces composing the works of a watch. Experi- 
ence shows that great skill and facility are acquired, 
in making any one of these parts, by the workman 
who confines himself to that one alone. The muscles 
of his hands and arms become so trained that they 
obey his will 'perfectly. For illustration: pupils in 
learning to play music on the piano, labor for a while 
to educate their fingers to obey their will, but in time 
the latter become so trained, that, apparently without 
an effort, they run accurately and rapidly over the 
keys ; that is, they have become obedient to the mind 
or will of the performer. In addition, by a mysterious 
influence over the action of the keys, the skillful 
player can impart to the music the expression of his 
emotions. 

44. EiFect Produced by a Book.— No doubt division 
of labor was practiced to some extent long before 1776, 
when Adam Smith, an Englishman, published a book 
— The Wealth of Nations— iw which he unfolded tlie 



DIVISION OF LAB OB. 51 

advantages of division of labor in manufacturing. 
This book was read by intelligent men ; and the value 
of the principle was recognized to such an extent, 
that in the course of time, division of labor in m.anu- 
facturing was introduced, wherever it was possible, 
throughout the civilized world. Its introduction led 
to more system in that business, by which the strength 
of the weaker employes could be utilized, and the 
lighter portions of the work assigned properly to 
young persons and to females, and that which required 
more muscular strength was given to men. The his- 
tory of manufacturing proves that the principle of 
division of labor gave an impulse to the various indus- 
tries wherein it was applied, while carrying them 
forward to greater perfection and success. It had also 
the effect of giving employment to a larger number of 
persons, meanwhile cheapening the articles produced, 
and at the same time making them better in conse- 
quence of the greater skill acquired by each worker 
confining himself to one part alone, so that, when the 
several completed parts were put together, they made 
the whole perfect. This principle of division of labor, 
where it is practicable to be introduced, pervades the 
industrial world of to-day — in the cotton factory, in 
silk mills, or in establishments producing any tex- 
tile fabrics, and also in many others in different fields 
of industry, of which we have not room to make 
mention. 

45. Illustrations.— The Barrel. — To illustrate the 
principle of division of labor we will take an article 



52 POLITICAL ECONOMY. 

that is simple in its construction. The barrel is com- 
posed of only three parts — the staves, the heads or 
ends and the hoops. Suppose a cooper gives his indi- 
vidual attention to preparing all its several parts, 
before putting them together^lrst the staves, second 
the pieces composing the ends, and third the hoops, 
and fourth the setting up of the barrel. It is clear, 
that he could not prepare all these pieces with the 
same facility as if he practiced on 07ily one of them. 
Thus working he might make, say, four barrels a day. 
But suppose that a number of men engage in making 
barrels ; one portion prepares the staves, another the 
heads or ends and still another the hoops, and the 
fourth puts all the component parts together, thus 
completing the barrel. This subdivision enables each 
workman to accomplish a much greater amount of the 
work on hand. It would follow that the entire prod- 
uct of these combined facilities would be greater in 
proportion and more perfect, because of the skill 
acquired in the practice upon one piece alone, tlian if 
each workman made all the separate parts first, and 
then put them together. To make the factory com- 
plete and the work systematic, the fourth workman 
arranges or sets up the component parts of the barrel 
and gives it the finishing touches. 

Let us suppose that, in order to have the finisher 
fully employed, it would require four men to make 
the staves ; two to prepare the ends, and one to make 
the hoops, and one to finish the barrel. Under this 
division of labor, we may suppose that instead of each 
workman making four barrels a day, when he himself 



DIVISION OF LABOR. 53 

did all the work, he prepared one of the component 
parts, say the staves, for thirty barrels, and the four 
together would do the same for one hundred and 
twenty. In the first case the eight workmen, each 
working alone would turn out only thirty-two barrels a 
day, but in the second when combined in the division 
of the work the result would be one hundred and 
twenty. The latter would be better made and fin- 
ished, owing to the increased skill acquired by each 
workman coDfining himself to one part alone. The 
various component parts of an article thus manu- 
factured, may not be made under the same roof, but 
often they are prepared hundreds of miles apart. In 
the city of New York are carriage factories, that have 
their felloes or rims made in one State ; their spokes 
in another ; their hubs in another, and the steel pre- 
pared for their tires in still another. 

46. The Loaf of Bread. — The composition of a loaf 
of bread illustrates another phase of the division of 
labor. The farmer prepares the soil, puts in the seed 
and harvests the crop ; he sells the wheat to the 
miller ; another party transports it to the mill where it 
is made into flour, which is put in a barrel and sent to 
the depot, and carried on the railway to where it is 
purchased by the baker, who prepares it for baking, 
puts it into the oven to be baked, and finally sends the 
loaf to his customer — the consumer for whose benefit 
all this time and labor has been spent. Meanwhile 
the latter has been laboring in some other industry to 
obtain the means of purchasing the loaf. 



54 POLITICAL ECONOMY. 

Vi. Advantages of Division of Labor. — Division of 
labor lias been found of great advantage when intro- 
duced on a large scale ; in truth it produces a diversity 
of pursuits^ whose results are combined in a united 
whole when the work is completed. The more civ- 
ilized and refined a people^ the more diversified are 
their pursuits, and the better these various depart- 
ments of production are conducted, the greater are the 
grand results. In a state of such mechanical progress, 
no one workman can be perfect in more than one or 
two departments. 

Upon the whole much more work is produced in a 
given time ; the articles are more accurately made and 
consequently they are better, and, owing to the greater 
facilities acquired by the operatives, the work does not 
cost so much labor, and thus they come cheaper to the 
consumer. Statistics on the subject prove this state- 
ment to be true of to-day when compared with the 
past, and the indications are that these facilities, thus 
adding to the comfort of the people, are increasing. 
Wheat-flour is made cheaper to the family because of 
the reaping and threshing machines ; so with the sew- 
ing machine — that friend of woman — though when 
first introduced much opposition was roused against it 
on the supposition that it would greatly interfere with 
the opportunities of the sewing-women to earn a living. 
It took some time for the difficulties growing out of 
its use to adjust themselves, but soon women had 
equally as much to do, and to-day they receive better 
wages than formerly. The sewing machine could do 
fine and more fancy work and faster than the same 



DIVISION OF LABOR. 55 

could be done by baud; and, in addition to this, the 
taste of the wearers gradually began to demand more 
and more of such decorative work. When that feature 
of dress-making is taken into consideration, and, also, 
that it takes almost as long time to make a dress 
having these extra touches, as it did before the era of 
the sewing machine to make one by hand-sewing, the 
value of the invention is shown. The machine thus 
proves itself to be a friend to the sewing women, since 
higher wages are given for work done upon it, and by 
its use they can accomplish so much more in a given 
time. 

48. Evils and Benefits of the System. — It has been 
urged that the continual application to one mechanical 
operation in manufacturing has a tendency to weaken 
the mental powers. To this objection it is answered 
that the evil can be guarded against by improving the 
mind by reading good books or by social intercourse in 
the hours when the workman or woman are exempt 
from labor. In addition it is maintained that the 
mental strain is not so great as often supposed, since 
the continual use of the muscles in operation soon 
puts them so completely under the control of the will 
that very little effort is required, the action becomes 
almost involuntary, and the tension of the mental 
faculties is scarcely perceptible, as when the fingers of 
the piano-player glide over the keys. 

It is also stated that physical health is sometimes 
impaired by overtasking some one muscle or limb, 
when the posture of the body is strained and thus kept 



56 POLITICAL ECONOMY. 

continuously. These objections have weight and must 
be guarded against according to the circumstances. 
The great benetits, which accrue to the people at large 
under the system of division of labor, consist in the 
articles produced of whatever class heiyig ^hetter made 
and costing less, while the advantages that accrue to 
those who work for wages consist in their having more 
employment than they could otherwise obtain. 



VIII. 

CAPITAL. 

49-54. We have noticed labor in some of its rela- 
tions to industries among civilized men. We now 
purpose to treat of another element that has much to 
do in this connection as employed in extensive enter- 
prises, and whose influence extends throughout the 
industrial and commercial world — that element is 
Capital. Capital is not an original possession or natural 
gift, but is the outcome of labor of some kind and at 
some time. We have seen that the surplus which a 
man owns after supplying his individual wants may be 
termed his wealth. The owner may possess any 
amount of gold stored in a vault ; it is so much wealth, 
though under the circumstances it brings him no more 
income than so many bricks. But when he invests this 
gold in business it becomes capital, as it is now to be 
used in acquiring more wealth. Such being the case, 
capital may he defined as that portion of luealth ivhich 
is employed in producing ivealth commodities and in 
distributing them. In this sense alone is the word 
capital used in political economy. The amount of 
capital thms employed may be quite limited or quite 
extensive, yet, in whatever form, it is included in the 
definition. 



58 POLITICAL ECONOMY. 

50. Money of itself not Capital. — Care should be 
taken not to confound mere money with capital, as the 
former of itself does not aid production. It becomes an 
active agent in producing wealth, only when its exchange 
value or purchasing poive7' is brought into use. In this 
manner it procures the raw material to be operated 
upon ; the cotton, the wool, the silk for their respective 
manufacturing into forms in which they can be used by 
the consumer. The raw material is as great in impor- 
tance as it is varied in character, since it is essential in 
all mechanical industries. The obtaining of the raw 
material, however, is only a very small part of the 
service which the purchasing power of money performs. 
The latter provides the mills, the machinery and the 
motive power, and the still greater outlay in the daily 
loages of those employed. Thus we see that the purchas- 
ing power of money in the form of capital has a wide 
range. Labor is said to create capital, but capital 
indirectly creates labor, inasmuch as it affords oppor- 
tunity for the latter's employment. 

51. The Range of Capital. — The farmer's land and 
the implements he uses in cultivating it all come 
under the name of capital, as defined in political 
economy. The means of sustenance for the workmen 
employed or of those who oversee come under the 
same general head. The railway company has its 
capital virtually in the road and its equipments — the 
track, the locomotives, the cars and other appurtenances. 
It uses money only in its disbursements for wages and 
other general expenses, yet the active operation of the 



CAPITAL. 59 

road continues to accumulate money, the surplus of 
which is to be utilized in being converted into more 
capital when the company enlarges its business or 
furnishes better accommodations for the people. The 
surplus may also become the property or wealth of the 
owners of the road, and each one can use his share 
according to his individual tastes, but strictly speaking 
the purchasing power of the money thus expended is 
not capital, as it is not expended to increase production. 
For illustration: ''^ All the wealth spent in buying, 
furnishing, and sailing a pleasure yacht is not capital, 
because its use in that way does not result in the pro- 
duction of other wealth." 

52. Productive and Unproductive Capital. — Some 
classes of capital must as such be destroyed, or at 
least changed in form. A web of cloth is one item of 
capital belonging to the tailor, as a side of leather may 
be to the shoemaker, but their forms are changed when 
one is made into coats and the other into shoes. By 
this application of labor their original value is enhanced. 
That is to say, when applied to some classes of capital, 
labor destroys their present value, but only to increase 
it under different conditions in the future. On 
the other hand, some classes remain virtually the same 
except the wear and tear, which must be repaired as 
necessity requires ; as for instance the grading of a rail- 
way, its tracks and rails. Mechanical industries are 
continually engaged in making changes in the original 
capital, but at the same time they increase values, that 
cover the cost of the capital thus changed, and also 



60 POLITICAL ECONOMY. 

remunerate for the labor expended. The capital 
invested in the raw material — it may be the iron-ore^ 
the coke or coal and the limestone — has been so manip- 
ulated, that the material it has purchased appears 
in the form of steel rails for the railroad, or it may be 
in the iron of a farmer^s plow or the edge tool of a 
mechanic. This principle pervades the whole field 
of mechanical industry ; capital in one form being 
changed so as to reappear in a different connection, but 
enhanced in value by the labor that is put upon it. In 
this way the wealth of individuals increases, and as they 
become rich, so does the nation. 

This, unfortunately, is not always the result, as 
owing to untoward circumstances, capital may be 
unproductive ; as for instance, when the industry in 
which it is invested pays no dividend. A railway is 
built and equipped, but its business only suffices to pay 
the running expenses, and therefore, it can pay no 
dividend or interest on the money whose purchasing- 
power built and furnished the road. 

53. Capital— Active or Fixed. — For the sake of dis- 
tinctness, capital is often defined as active or circulat- 
ing, and fixed. The first term is applied when capital 
is operated upon in the process of production, and the 
raw material is destroyed in changing its form, as a 
bale of cotten when spun into thread. In the same 
class of capital is reckoned the wages paid employes, or 
what is used for their subsistence ; the office of both is 
thus fulfilled in their being consumed. In this form 
there is going on a continuous transition or change in 



CAPITAL. 61 

capital until the final product is in the hands of the 
consumer, for whom the changes have been made. 
For illustration: the material of the plow, the iron, the 
wood, the sustenance and the v/ages of the workmen, 
etc., belong to the class of capital defined active or 
circulating, but when the perfected plow comes into the 
possession of the farmer, it becomes apart of his fixed 
capital, because he can use it year after year, and it 
does not perish at once in the using. The same may be 
said of the locomotive, till it is purchased by the rail- 
way company and comes into its possession ready for 
use. We find, therefore, that all fixed capital is the 
outgrowth of the previously existing active or circulat- 
ing capital — the latter in its province being limited to a 
single use or operation. All fixed capital, because of 
continuous use, is liable to wastage, and from time to 
time requires to be repaired or renewed. 

The illustrations to be drawn from fixed capital are 
unlimited in number, and the pupil for his own mental 
benefit can exercise his ingenuity in tracing them 
out — the utensils of the farmer, and the improvements 
on his land ; the machinery of the manufacturer ; the 
ship and its rigging of the shipmaster ; the railway and 
its equipments of the corporation, belong to this class 
and are subject to these conditions. j 

'^ Money is circulating capital, as to the person who 
pays and receives it, because capable of but one use, for 
the time, by one person. ^^ But when lying idle in the 
vaults of a bank or of the Treasury at Washington, it 
may be viewed as the fixed capital of some person or of 
the Government. However, to draw the defining line 



62 POLITICAL ECONOMY, 

perfectly, between these two classes of capital, is impos< 
sible under all conditions, since they are so intimately 
connected that they very often overlap one another. 

54. The Cause of Over-Production. — In success in 
manufacturing often lurks a temptation to increase the 
production beyond the wants of the community ; — and 
the lack of prudent foresight in the owners of capital 
often causes them to yield to the tempter. For instance : 
when there is a sufficient amount of woolen cloth made 
to supply the wants of the consumers, aud the capital 
in that branch of industry pays a fair dividend, and 
the workpeople receive fair wages and continuous 
employment, the owners, it may be, wish still larger 
incomes, and they invest in that business more capital 
and correspondingly increase the production. They 
thus show defective business -capacity, if they do not 
take into consideration the wants of the consumers 
who are already sufficiently supplied by the output of 
the present mills, when running at their full strength. 
A similar lack of judgment applies to outside capital- 
ists, who establish new woolen mills, when those 
already in existence and in operation supply the wants 
of the community. The latter should take into con- 
sideration not only the home market but the foreign. 
In either case a glut in both markets occurs, and the 
loss of profit on the stock on hand that cannot be sold, 
causes a depression in the industry, and, perhaps, 
stoppage for a time of the mills, with loss of money to 
the owners and loss of employment and wages to the 
workpeople. It would have been better if this extra 



CAPITAL. 63 

capital had been invested elsewhere, or had even re- 
mained idle. In that case the mills would have gone 
on as usual, the workpeople kept employed at their 
accustomed wages, the consumers amply supplied, 
the original capital paying fair dividends — but instead 
the over-production has retarded the equable onward 
flow of the industry. 



IX. 



SKILL a:n"d muscle, forms of capital. 

55-59. — ^'^ Capital is always the fruit of past labor 
saved/^ says Dr. Waylaiid. This is a general state- 
ment in respect to the origin of capital in the form of 
wealth, but it applies with equal force to the skill of 
the mechanic, and to his trained power of using his 
strength of muscle when engaged in work. To acquire 
this power he has labored diligently ; he has trained his 
-eye and his muscles to obey his will, and this combina- 
tion constitutes his skill — Ids capital — which power he 
retains or saves, and which he invests, when he engages 
in work. Political economy recognizes the medical 
knowledge of the physician, his trained eye and com- 
mand of muscle, that enables him to perform a surgi- 
cal operation, as his special capital ; in like manner it 
acknowledges as his capital the legal acquirements of 
the lawyer, and also that of the theological learning of 
the clergyman — why not thus recognize the trained 
eye and muscle of the mechanic ? To be sure, the 
latter is a lower form of acquirement or capital, though 
it is equally essential in its own sphere of application. 
The final result is that competent workmen have ac- 
cumulated an amount of a certain class of knowledge 
and skill, which they possess as their special capital, 



SKILL AND MUSCLE, FORMS OF CAPITAL. Qo 

and it is as truly theirs as the money acquired by the 
merchant or the manufacturer wlio invests its purchas- 
ing power in his business and calls it capital. 

56. Dividends Derived from Skill. — The capital con- 
sisting in skill does not pay dividends in the .same 
manner that the purchasing power of money does 
when invested in a corporation or business firm. The 
latter, though the owner himself may not personally 
utilize it, remains ; it may be as silent capital, and 
thus sustain a share of the business and justly 
receive a share of the profit. But skill as capital 
must be used by the owner himself ; for from the na- 
ture of the case, he cannot delegate to another the 
authority or power to use it, as can be done with cap- 
ital based on the purchasing value of money. 

57. The Union of the two kinds of Capital. — There is 
an intimate connection between capital as the piirchase- 
poiver of money, and capital as recognized in sMll and 
muscle. The one cannot be effective in production, 
without the aid of the other, as they are mutually 
dependent upon one another for their common success. 
If the two classes 'of capital were united in one indi- 
vidual, there could be no clashing of interests, as they 
would be blended in the interest of only one person. 
The mechanic or the farmer, for instance, of limited 
means, may himself own the capital and also the skill 
to perform the labor ; but if all farmers and mechanics 
were thus situated the world's progress would be 
retarded, and in truth, its varied industries would be 



66 POLITICAL ECONOMY. 

reduced to their original elements^ and scarcely any 
advance could or would be made. 

In order to establish manufactures of various kinds 
and on a scale sufficiently large to supply the numer-. 
ous wants of a civilized people, there must be a coop- 
eration of the two capitals — that of money and that of 
skill and muscle. To secure the proper result these 
two must act together, harmoniously ; let neither be 
governed by selfish principles — that is, one class of cap- 
ital endeavoring to secure advantages at the expense of 
the other, instead of both being governed by the 
Golden Rule. The employers are sometimes accused 
of selfishly oppressing their employes by lowering their 
wages and various restrictions ; while on the other hand, 
it is sometimes charged that the latter manifest little 
interest in the welfare of the employers^ business by 
not working diligently, or wasting the material, or 
being careless in their manner of performing the duties 
for which they are paid. There should be no cause for 
these recriminations, especially between parties whose 
mutual interests are so much promoted by their both 
acting in good faith and in a harmonious and self- 
respecting manner toward one another. The amount 
of moneyed capital must be large in order to supply the 
buildings, the machinery, the motive power, etc., and 
tlie numerous other things necessary to carry on exten- 
sive manufacturing industries, and in consequence, 
employing great numbers of workpeople. 

58. The two Classes of Capital Cooperate.— We have 
treated of labor under one aspect and also of capital ; 



SKILL AND MUSCLE, FORMS OF CAPITAL. 67 

now we propose to notice the manner in which they 
should be blended in order to produce the best advan- 
tages for each. It is evident that in accomplishing 
grand results the means must be correspondingly 
great. The single workman can do but little, com- 
paratively, when he is trammeled by want of capital to 
obtain the requisite raw material and other facilities 
to promote his object. One individual seldom has 
sufficient to undertake great enterprises, as they 
require more capital than one person can usually sup- 
ply ; hence the necessity of combinations of those who 
have sums to invest, in order that these moneys in 
the aggregate can supply the requisite amount. 
Thus companies have been formed to carry on large 
operations — such as manufacturing, commerce on the 
ocean or transportation on land by means of railways. 
The parties subscribing the money become stock- 
holders ; and, after having obtained a charter to legalize 
their corporate action, they em23loy men whom they 
deem competent to manage the affairs of the company. 
These great corporations from their first introduction 
have, in effect, been stimulants in promoting the varied 
industries of the civilized world — both mechanical and 
commercial. The effect is two-fold ; one upon those of 
small means who invest in these corporations and derive 
interest from their investment ; the other upon those 
whose only ccqntal is their shill and muscle, which ly 
their having employment, they, too, can invest and re- 
ceive dividends or wages. 

It is found that very often difficulties arise when the 
money-capital is owned entirely by one party, and 



68 POLITICAL ECONOMY, 

that of skill and muscle by another. To obviate these 
evils cooperation proposes to unite the two classes of 
capital in such manner as to make the interests of all 
concerned mutual, and thus concentrate both interests 
in a number of the same persons. This would be on 
an enlarged scale but similar to that of the farmer or 
mechanic owning in himself both capitals mentioned, 
in which case there could be no real clashing of inter- 
ests. Here the money-capital could be put under 
the control of competent men, and the capital of skill 
and muscle, which ordinarily is so much diffused, 
could be also concentrated by uniting individual inter- 
ests as a whole. 



X 

PRACTICAL COOPERATION" 

59-67. A genuine cooperation is formed when a 
number of individuals combine to furnish hoth the 
money -capital and the labor-capital. This arrange- 
ment is radically different from a system where in the 
money-capital is owned by one party and the skill and 
muscle capital by another. In the latter case, the 
former pays the wages agreed upon in proportion to the 
value of the skill exercised, when the owner or work- 
man properly performs the service required. The 
value of the money-capital is estimated by the use of 
its purchasing power, while that of the skill and muscle 
must be estimated on a different principle, such as the 
grade of skill possessed by the owner, and also, his 
willingness to use it to its full extent. 

An Ideal Arrangement. — On the presumption that all 
workmen are willing to perform their duty in a con- 
scientious manner, could there not be an ideal standard 
of skill-value established by mutual agreement or by 
arbitration, that would satisfy the parties concerned ? 
In order to recognize the gradual improvement made 
by each workman, this skill-value might be readjusted 
annually. This ideal standard, as to its worth, could 



70 POLITICAL ECONOMY. 

be estimated in money-value, say 110,000. That 
is, the skill, acquired by the mechanic after the 
necessary apprenticeship and stud}^, is of as much 
money-worth to him in his work as is the skill of the 
physician in his practice. The skill of the physician is 
of money-value to him in his practice ; in a similar 
manner, though on a lower, level, the skill of the 
mechanic becomes available to him when he works. 

A cooperative plan might be arranged similar to this : 
That all the workmen in the association receive the 
same fixed wages for a week or month^s labor as agreed 
upon, and for illustration, let the aggregate for the 
year amount to $500, but in addition each work- 
man would receive at the end of the year, the interest, 
say at four per cent., 07i the money-vahcation of his 
individual skill. Since there would be different grades 
of skill, among the workmen these amounts would vary 
— none however, reaching the ideal of 110,000. 
The estimates might range from a few hundred dollars 
up toward the ideal. Suppose one grade receives the 
stipulated $500 and in addition on their skill-value 
of $6,000 four per cent, or $240, another grade the 
percentage on $4,000 or $160, and so on. This mode of 
adjustment would act as a motive for every self-respect- 
ing workman to acquire more skill from year to year, 
and thus improve his workmanship ; his ambition would 
be to reach as near as possible the ideal standard, and 
in consequence secure more wages or dividends. This 
stimulant would influence self-respecting workmen of 
every grade of skill to rise still higher, the way of 
improvement being open to all. 



PRACTICAL COOPERATION. 71 

60. The Contrast with Honest Work. — An illustration : 
we may suppose a company of bricklayers at work on a 
building, the regulation of their society being, that 
the standard of work accomplished should be graduated 
according to that done by the slowest workman of the 
association. The bricks, in accordance with the direc- 
tions of the inspector, must be placed properly in the 
wall, and while the skillful workmen perform their 
portion more rapidly than the less skillful by running 
up their part to the line long before the latter, and in 
consequence they can remain idle, till the slower work- 
men had completed their portion. This mode of action 
grossly cheats the employer, who pays the wages due 
the rapid work of the more skillful, but receives in 
return the aggregate work done by the slower and less 
skillful. Under such regulations there is no induce- 
ment for the mechanic to become any more skillful 
than simply to obtain employment ; if he were at first 
an honest man, such influence would soon make him 
dishonest, in receiving wages for work which he never 
performed ; meanwhile, the general effect would be 
morally injurious and degrading to the self-respect of 
the workmen. 

61. The Good-will between Capital and Labor. — It is 

essential for the perfect success and advancement of 
industries and general prosperity of both parties, that 
there should be genuine good-will between capital and 
labor. The former can produce absolutely nothing 
without the aid of the latter, but with such aid an 
immensp ^mount—all that is needed to promote tlie 



72 POLITICAL ECONOMY. 

material comfort of the people at large. Injustice on 
either side will come back in retribution — the non- 
paying of fair wages is a wrong on the part of the 
employer, and it is equally a wrong on the part of those 
employed to shirk their work; that is, not in good faith 
performing a full day^s labor; or to take advantage of a 
pressure, financial or otherwise, upon the employer to 
demand an increase of wages, and if it is not complied 
with to stop work, when to the former it would be 
specially injurious. The act of seizing such an 
occasion, even if the demand in itself were just, is a 
form of extortion, and engenders an unkind feeling 
between the parties, which must be injurious to both. 
To act in accordance with the Golden Eule is for their 
mutual interests, and that should be an inducement to 
reciprocal good feeling. 

62. The More Capital, the More Advantage to the 
Wage-earner. — In the present state of civilized society, 
to carry on enterprises sufficiently great to satisfy the 
demands of the people, there must be invested 
immense sums of capital in land, in the machinery 
and the necessary equipments for manufacturing on 
an extended scale, as well as in mining, in transporta- 
tion on land by means of railways, or by water in 
ocean-going vessels. After these are provided, there 
are millions of hands, from the stalwart man to the 
delicate girl, that are ready to aid in the great and 
varied work of making this capital available. Justice 
demands that these myriads of workers should have 
due reward for their toil, and, also, that the capital 



PRACTICAL COOPERATION. 73 

invested should have its reward — both rest upon the 
same basis of right; one for present work^ the other for 
the fruit of former labor. In the order of Providence, 
it can never be otherwise than that the vast majority 
of the people must earn their living by some form of 
labor, it may be manual, or it may be mental or a com- 
bination of both — the prime necessity is labor in some 
form. If all were capitalists, it would be the next 
worst thing to all being mere workers. It follows 
from this that capital limits or extends lahor — that is, 
it gives opportunity for the employment of labor, and 
thus promotes industry. The two must act together 
harmoniously to be mutually benefited. When we 
take into consideration the much greater number of 
those who earn a living in the form of wages by their 
labor than of those who own capital, it is evident that 
the latter invested in such manner as to give remuner- 
ative employment to large numbers, confers upon 
them much greater benefits in proportion than upon 
the few who own the money-capital. Hence the more 
capital that is judiciously invested, the more benefit 
accrues to the great majority of the people. It not 
only affords opportunity in giving employment to this 
majority, and thereby improves their social condition 
and comfort by means of living wages, but it likewise en- 
hances the prosperity of the whole community. To ac- 
complish this grand result, luibits of temperance and econ- 
omy, which of themselves are a great gain, are required. 

63. Honest Work and Ample Wages. — There is another 
element that enters into success in every kind of 



74 POLITICAL ECONOMY. 

industry, where there are employers and employes — 
that is the principle of honest work, and for it, ample 
remuneration. This is based upon justice being exer- 
cised by both parties ; for the obligation to deal justly 
is equally binding upon both and no reasoning to the 
contrary can change these eternal principles of right. 
When the possessors of the two capitals thus act 
harmoniously, the benefits conferred upon the owners 
are equal in producing success ; nor should there be 
room for envyings and unkind feelings. We are prone 
to think our own troubles greater than those of our 
neighbors, and yet, if we could have the opportunity, 
we would not exchange sorrows with them once in a 
thousand times. Diversities of temperament are liable 
to produce differences of opinion, and these often lead 
to disagreements that are injurious to both parties, 
and yet the relation of employer and employe has 
some compensations. The workpeople have not the 
mental wear and tear of the owners, who must undergo 
a large amount of anxiety which is unknown to the 
former. The employes, however, are deeply interested 
in the success or failure of the corporation that 
employs them, as their capital of skill and muscle is 
liable in the latter case to be thrown out of employ- 
ment, though their responsibilities extend no further, 
while the money-capital may be liable for debts. 

64. Mind is the Director. — The more advanced men 
become in knowledge, the more are they able to avail 
themselves of the powers of nature. The Creator has 
constituted these powers in such manner, that man by 



PRACTICAL COOPERATION. 75 

proper 3^^tudy and effort can ascertain their qualities 
and utilize them — one generation accepting as a 
legacy the acquired knowledge of the one previous, 
while it is itself passing on to still higher attainments. 
Ages were taken in experiments before the ingenuity 
of man was able to construct the clock, and thus use 
the power of nature known as gravitation, and so to 
combine its mechanism that the force, used only for a 
few moments in winding up the weights, could be 
made to keep time, and be distributed over eight days. 
Much more ingenious and complex is the mechanism 
of the watch. The intellect of man in innumerable 
instances has made the forces of nature available, and 
in connection therewith has constructed machinery to 
accomplish ends as numerous as they are diversified. 

65. Education and Cooperation. — There are in com- 
parison with the whole number of the people very few 
inventors, perhaps not one in ten thousand, but to use 
their inventions and make them available requires a 
certain amount of education in the workman or w^ork- 
woman. The mind must act, and the better trained 
it is, the better can the work be done. To conduct 
cooperation requires more knowledge among the 
workmen than when they are merely employes. They 
should have broad views of the common interests that 
are involved. The ignorant, in consequence of their 
lack of knowledge, are more suspicions than the intel- 
ligent, and they have often an indefinable feeling of 
distrust of those who know more than themselves. 
This ignorance makes them narrow-minded and appre- 



76 POLITICAL ECONOMY. 

hensive lest they should be imposed upon, and a 
sort of caste feeling grows up, for which in one sense 
at least, there is no reason, especially in our country, 
where all are on a political equaliti/. An education 
inspires respect, as it enables the workpeople to under- 
stand the relation they sustain to their employers or, if 
in cooperative unions, to their fellow-members, as to 
what are their rights. It follows from this that it is 
sound luisdojn for the government to give a common- 
school education to all its youth — male and female — in 
order that they may be able, if nothing more, to labor 
intelligently and profitably. 

It is assumed by some writers on political economy, 
that to aid one^s self or satisfy desires is the main- 
spring of human effort; this may be true, but it should 
not mar the truth that with it should be connected a 
respect for the rights of others, when endeavoring to 
secure for themselves the rewards of their labors. 
With us as a nation, it is peculiarly proper and 
expedient that all classes — those who work for wages, 
and those who have other means of support — should be 
intelligent, as all are on a 2^olitical equality, and 
by their votes elect their law-makers — from the 
highest to the lowest in the land. With this educa- 
tion should be intimately connected correct principles 
of morals as an element of success in the general 
advancement of the material progress of the nation. 
Such advancement depends upon the industry and 
frugality of the people themselves, whose intelligence 
should be united with the force of a just and righteous 
public opinion, the latter being the outgrowth of an 



PEACTICAL COOPERATION. 77 

unconscious influence of correct moral sentiments that 
should pervade the minds of all;, that is — the owners of 
hotli classes of capital. 

66. Morality and Cooperation. We have seen that 
it is essential for success that the members of a 
cooperative association should be sufficiently intelli- 
gent to understand their mutual relations to one 
another, and thus have proper views of their common 
interests, and that these are best promoted by a 
straightforward and honest purpose pervading the 
entire association. Mutual respect between individ- 
uals must be the outgrowth of each one's self-respect — 
a sentiment that leads to ho7iesty of purpose, vt;ndii\\Q 
application of the Golden Eule. Under such influence 
the work of whatever kind would he honestly performed 
by those who labor, while the management of the con- 
cern would be conscientiously conducted. It is only 
in the spirit of this high-toned morality, that such 
associations can prosper ; when every member shall be 
industrious in performing his or her specific duties, 
and practically manifest as much interest in the affairs 
of the association as if they tended alone to their own 
individual benefit, though each one's share may be 
only in proportion to the number of members. 
This principle of action is not inconsistent with the 
strictest application of justice to each one's self and to 
his or her fellow-members. It is more important to 
success for the members of such association that they 
perform their duties faithfully as workmen, than it is 
when the money-capital is held by one party and the 



78 POLITICAL ECONOMY. 

labor performed for wages by another, because in the 
latter case, the management can in self-defense dis- 
miss the delinquent at will. 

67. The Social Element in Cooperation. — The social 
advantages of cooperation on the plan suggested, are 
of very great importance to the members as such. 
Being thus united, all concerned are stimulated to aim 
at excellence in workmanship ; being also on an 
equality and having a share in the aggregate money- 
capital invested, while their skill and muscle, their 
own special ca2ntal, is also invested by being employed. 
This influence, when it pervades the entire associa- 
tion, has a tendency to raise its members to a higher 
plane of intelligence and social dignity. Political 
economy recognizes the importance of the intelligence 
and the moral culture of the workpeople, as well as of 
that portion of the community who are not engaged in 
manual labor. In our country the people choose their 
own legislators ; the latter partaking in a great meas- 
ure of the moral characteristics of their direct con- 
stituents — that is, of those who voted for them. 

There are under ordinary circumstances much 
greater facilities for self-culture among the member- 
ship of an association, than if as individuals, without 
any special union of interest, they worked together for 
an employer, but only for wages. In their collective 
capacity as members of a cooperative association, their 
facilities for self-improvement are immensely increased; 
they can have libraries in common, lectures and amuse- 
ments, and other forms of mental culture and moral 



PB ACTIO AL COOPEBATION, 79 

instruction. The grand success must depend upon 
the steady industry of the members themselves, and 
the skillful and honest management of the business of 
whatever kind belonging to the association. It spe- 
cially requires a high grade of wisdom and of integrity 
in all parties concerned, to conduct to a satisfactory 
issue the industries and financial affairs of a coopera- 
tive association. 



XI. 

TAXATION^. 

68-77. In connection with every government, are 
numerous expenses for which provision must be made. 
This is usually done by means of taxes levied upon the 
property of the citizens ; the rate per cent, being deter- 
mined according to the amount required. The indus- 
trial success and happiness of a self-ruling people 
depend very much upon having a government, under 
which the rights of the citizen, both civil and religious, 
are respected and guarded, property secured to its 
owners, and the way for effort and self-support open to 
all. It comes within the province of political econ- 
omy to treat of the subject of taxation, and of the best 
means to secure the requisite amount of funds, with as 
little inconvenience as possible to the citizen. 

Taxes are imposed in different ways and, often, foi- 
distinct purposes — some are direct, that is levied on 
the property, and paid to a collector; some are in the 
form of licenses or permissions to engage in certain 
kinds of business, and some are paid indirectly by tbe 
consumer, as when he purchases an article of foreign 
manufacture which has already paid duty to the gov- 
ernment. We shall in order, first, notice the two most 
important of these taxes, because of their compara- 



TAXATION. 81 

tively large amounts — the direct, levied upon land and 
its improvements ; and the indirect, imposed as a duty 
or tariff upon foreign property when imported for sale. 

69. Expenses of two Governments. — When George 
Washington was inaugurated President in 1789, we 
began our national life, but under two independent 
governments — that of the United States or National, 
and those of the original Thirteen States. It was 
important that the funds to defray the expenses of 
these two separate governments should be obtained 
from different sources, and, also, in the interest of 
financial harmony, that they should not come in con- 
flict. Providentially, there were at hand two sources 
of income that were independent of one another. 

In adopting the Constitution of the United States, 
previous to the practical inauguration of the National 
government, the people of the several States, by their 
own vote, delegated to Congress or the incoming gov- 
ernment, the entire control of their affairs with foreign 
nations. In consequence it was deemed expedient and 
fitting that the latter government should derive its 
support from the duties levied on the merchandise or 
foreign property, which, in the form of importations, 
should be brought into the country for sale. On the 
other hand, the tax derived from real estate or land, 
and the improvements thereon, was designed to defray 
the expenses of the State governments. It was thus 
recognized, that a case of silks or a ton of iron was 
as much property as an acre of land, and that they 
both ought to be subjected to taxation, in order to pay 



82 POLITICAL ECONOMY. 

their share of the current expenses of the respective 
governments. This is the general theory on the sub- 
ject ; though it was wisely ordained in the Constitu- 
tion, that in cases of emergency the National 
government could resort, also, to an internal revenue 
tax. It has been compelled occasionally to adopt the 
latter expedient to obtain funds in cases of extra- 
ordinary expenses such as those incurred by war, but 
otherwise, the import duties have hitherto furnished 
sufficient revenue to defray all its current expenses. 

70. The two Modes of levying Taxes. — There being, 
as just stated, two independent sources of income, the 
student will note the manner in which the two govern- 
ments, respectively, derive their revenues. The usual 
mode of levying and collecting taxes for the use of the 
State is quite simple in its operation. The value of 
the property to be taxed is first estimated, and, when 
the amount of revenue required is known, it is easy to 
determine the rate per cent, which will produce that 
amount. If there should be a deficiency, the proper 
authorities can easily increase the rate per cent, in por- 
portion. In contrast with this direct and simple 
method of raising revenue by the States, is the indi- 
rect one, so complex in its adjustments, which in their 
application often embarrass the National government 
in its efforts to obtain funds for its own support. 
In respect to the latter, are many contingencies ; 
for instance, among imported manufactured articles, 
are often found numbers of the same classes that we 
ourselves make. It follows that the tariff or duty 



TAXATION. 83 

imposed on such foreign property when imported for 
sale, ought to be so adjusted as not to injure the 
similar classes of industries of our oivn tvorhpeople, 7ior 
depreciate the value of the Money- Capital invested in 
such manufacturing. These two parties each have 
equal claims to right and justice. The National gov- 
ernment having control of this source of revenue often 
has difficulty in solving the problem — how to levy the 
tariff in order to secure the requisite amount of funds, 
and at the same time afford ample scope to the pro- 
gress of the mechanical industries of the people. The 
tariff must not be so high as to exclude foreign mer- 
chandise altogether; in that case there would be no 
revenue : on the other hand, if no tariff was levied at 
all on imported property — that is under free trade — 
the result would be the same — no revenue. 

The American people cannot afford to adopt either of 
these modes, as in both cases the support of their two 
governments would have to be borne by direct taxa- 
tion in some form, while under the second mode the 
immense amount of foreign property imported for 
sale would be exempt from bearing its share of the 
public expense. Neither on the other hand, should 
the government impose a tariff at a rate so low that 
European manufacturers, in consequence of the low 
wages paid their workpeople, could undersell the 
Americans even in their own markets, and thus 
deprive them of their just reward or profit. Tlie 
latter would be compelled to withdraw from this 
unequal foreign competition, or lower the wages of 
their workpeople — the main item of expense — to a 



84 POLITICAL ECONOMY. 

level with that paid abroad. In tliat case the home 
industry would be ruined, the capital invested virtu- 
ally lost, and our own workpeople thrown out of 
employment. These evils the National government 
should avoid by adjusting the tariff so as to secure 
the required amount of revenue, and at the same time 
23ut no obstructions in the way of promoting our own 
mechanical industries. 

71. Third Mode. — There is also a mode sometimes 
proposed of adjusting the tariff in such manner as to 
secure the greatest amount of revenue, thus treating 
as secondary the other interests involved, such as the 
wages of the workpeople, and the just profit of capital 
invested. Under such conditions the tariff is used 
only as an instrument for obtaining revenue, and the 
National government assumes the role of a tax-gath- 
erer alone — that is, obtaining revenue is virtually the 
primary object, while the promotion of the mechanical 
industries of the Nation is deemed only secondary. It 
is the privilege, however, of a wise and just govern- 
ment to protect the interests of all its people on the 
principle of the greatest good to the greatest number 
— the latter in the United States being undoubtedly, 
those who labor for wages. The highest type of 
statesmanship will legislate on such subjects not only 
to secure sufficient revenue but at the same time to 
encourage the industries of the people. 

Let the student carefully bear in mind that the direct 
tax, derived from real estate and personal property, 
is for the use of the citizens in bearing the expenses of 



TAXATION. 85 

their respective State governments ; while the revenue 
— an indirect tax — derived from a tariff on imported 
property brought in for sale^ overlaps the States and 
benefits all their citizens collectively, by furnishing 
funds to defray the expenses of the National govern- 
ment — the common heritage of all. 

72. The Key to the Adjustment. — Political economy 
can only suggest general principles of action, since 
conditions are liable to vary from time to time. As a 
rule the raw material and the various appliances for 
manufacturing cost less in Europe than in the United 
States, while there is a much greater disparity between 
the two in respect to the wages paid operatives or 
workpeople — the latter being by far the greatest item 
of expense. On a medium average the wages paid by 
the European employer is sixty per cent, less than that 
paid by the American ; that is, when the latter pays 
one dollar the former pays forty cents. These rates 
may vary, occasionally, in certain localities, but in the 
main the average is correct, as derived from statistics. 

It follows from this fact that the key to the situa- 
tion must be in so adjusting the tariff that foreign 
goods cannot be imported and sold in our markets in 
unfair competition with similar productions of our 
own. That principle being adopted, the foreign man- 
ufactured article when laid down in our market would 
have imposed upon it, in addition to its first cost, a 
duty, based on this difference in wages, sufficiently 
high to make its cost equal that of the similar Amer- 
ican products. This arrangement would place on fair 



86 POLITICAL ECONOMY. 

and equal terms in our own market the competition 
between the European and American manufacturers, 
while at the same time securing the required revenue 
and affording our own workpeople employment at liv- 
ing wages. The student will carefully bear in mind, 
that this tariff is imposed upon the foreign made 
article, because it is property brought in for sale and 
which, as such, ought to bear its portion of the expense 
of the National government, and also that the benefits 
thereby accruing to the advantage of American manu- 
facturers and workpeople are merely incidental. 

73. The Key Applied. — An example may illustrate 
the principle. An American manufacturer produces 
a certain number of yards of dress silks, which he 
places upon the market of his own country. Their 
first cost in consequence of the high wages he has paid his 
employes, is, say, one hundred mid fifty dollars. But side 
by side with his silks is laid down in the same market 
an equal amount of European silks of the same quality, 
whose first cost is only iiinety -seven dollars, owing to the 
low wages paid the workpeople who made them. The 
average duty on dress silks is, say, fifty per cent., and 
when the foreign silk pays that duty, its cost equals the 
first cost of the American, and the market is open fairly 
to both parties to sell at whatever rate of profit they 
choose. This duty of fifty per cent, does not aid, in the 
form of money, the American manufacturer and his 
workpeople ; it only enables them to meet their Euro- 
pean rivals in their own market on an equality, as to the 
cost of their respective silks. Thus far and no farther 



TAXATION. 87 

the tariff protects the domestic manufacture by affording 
it an equal chance to compete on American soil with 
the low wages paid abroad. Meanwhile the fifty per 
cent, on the original value of this silk property brought 
in for sale, goes toward bearing the expenses of the Na- 
tional government and thus far benefits all the people. 

74. The duestion and Answer. — It may be asked if 
European silks can come into our market so much 
cheaper than Americans can afford to make them 
because of the higher wages paid by the latter, why 
not have silks imported without imposing any duty at 
all, and let the people have the negative advantage of 
buying silks that much cheaper, rather than the posi- 
tive benefit of applying the duty imposed toward 
bearing the expenses of the National government? In 
turn it may be asked, if that principle be correct, why 
not apply it to all manufactured articles made abroad? 
The answer is, if that were the case, the Americans 
who are capitalists, would not invest under such con- 
ditions in manufacturing at all and those who might 
wisli to work in mechanical industries could have no 
such employment ; and in addition the National gov- 
ernment would have to resort to direct taxation. 
Under such circumstances, the people would not have 
the means to purchase silks nor any other imported 
manufactured articles ; they could only barter among 
themselves. In justice to the American employes the 
cost of production in Europe and the United States 
should be equalized by imposing a tariff sufficient for 
the purpose on the foreign made article, rather tliaii 



88 POLITICAL ECONOMY. 

by lowering the former's wages to the standard of the 
workpeople of Europe. Under the condition of lack of 
employment, it is evident that the American work- 
people could not have the means of purchasing these 
foreign manufactured goods, by exchanging the prod- 
ucts of their own labor, though the foreign goods 
might be deemed cheap. Such would be the actual 
result and in addition our immense natural resources 
would, to a great extent, remain undeveloped. 

75. The Railroad President's Views.— x\nother phase 
of the subject may be illustrated by the answer of the 
president of an important railway, when asked if it 
would not be for the pecuniary advantage of his road 
to purchase steel rails from England free of duty, 
rather than use the equally good American. The 
answer was : "'No; it is better for the earnings of the 
road to purchase home-made rails and pay the pro- 
posed enchanced price per ton ; because their domestic 
manufacture, taken in connection with the other 
industries necessary to it, would increase the business 
and the earnings of the road far more than the extra 
amount saved by the lower price. In addition, the 
good effect, if any at all, of the purchase of the rails 
at the lower rate would be only temporary, wdiile their 
domestic manufacture would in consequence promote 
many industries that would become permanent, and thus 
continue to affect favorably the earnings of the road.^^ 

76. In this condition political economy recognizes 
the expediency and judicious policy of a tariff on 



TAXATION. 89 

imported goods being so adjusted that those articles 
which are deemed luxuries should bear a greater duty 
in proportion than those that pertain more generally 
to the comfort of the great majority of the people. 
Fine textile fabrics of different varieties for clothing, 
such as the finest laces, shawls and cloths and elaborately 
made silks and velvets ; precious stones and other high- 
priced articles in numerous forms for ornamentation 
in private dwellings, also superior wines and other 
spirituous liquors, are all specially recognized as 
luxuries, and are purchased only by the wealthy. 
Though on these classes of merchandise the tariff is 
high as well as the price, the latter is cheerfully paid 
by those who wish to enjoy the luxury which these 
articles afford. The comparatively heavy duties on 
such foreign imports are paid by the wealthy, who 
have their compensation in the pleasure which their 
possession affords. The duties on luxuries thus sup- 
ply an unusual amount of funds for the support of 
the National government, and so confer a benefit 
upon all classes of the American people. 

77. Other Taxes Required. — In addition to the two 
principal taxes that we have noticed are others 'which 
are levied on occasions for special purposes, such as 
the internal revenue by the United States government. 
Cities, also, impose special taxes in order to defray 
their expenses, which are often heavy, because munici- 
pal governments require an unusual number of officials 
to supervise the various departments that are necessary 
to promote the comfort and protection of the citizens, 



90 POLITICAL KCONOMT. 

such as water-works, the fire department, lighting the 
streets, and the protection of the citizens by a police 
force. The State also imposes a tax for the support of 
public schools. Taxes are paid likewise in the purchase 
of licenses for permission to engage in certain kinds of 
business, such as that of selling intoxicating liquors. 
This is designed to regulate the traffic, since it is in- 
jurious in its influence, and it would not be wise to leave 
it to the option of any one to enter upon the business. 
Taxes are collected in different ways. Those im- 
posed upon manufactured spirituous liquors are paid 
by means of revenue stamps that are affixed to the 
vessel containing the liquid. Some States levy a poll- 
tax on each individual male citizen; others tax per- 
sonal property when it comes under the class of 
luxuries, such as carriages and horses, and other arti- 
cles that are more for ornament than utility. Under 
the head of personal property are reckoned securities 
of various kinds, and also incomes. There are, how- 
ever, many difficulties in collecting an income tax. 
The temptation to conceal the real amount of their 
income is too strong for men whose conscience is some- 
what elastic, and they shirk their duty, while the 
upright honestly pay their tax. This mode works 
unequally, and the honest suffer, though the dishonest 
suffer still more by vitiating their integrity and self- 
respect, if they have not already parted company with 
them. 



XII. 

A PATERKAL GOVERNMENT — AND ITS LEGISLATION. 

78-84. An illustration of the manner in which our 
National government should care for its own people 
maybe drawn from what public opinion in a Christian- 
ized community demands of the head of a family. The 
head of a family is expected to provide for the wants 
of his own household, and to maintain its rights in the 
face of adverse circumstances. In like manner the 
National government in its paternal character guards 
the liberties, civil and religious, and the industrial in- 
terests of its household of sixty-five million people. 
As the upright father deals justly with those outside his 
family, so should our government be guided by the 
Golden Rule in its treatment of other nations. Mean- 
while, let the proverb that, ''charity begins at home," 
be recognized as applying to the Nation as well as to 
the family. True and comprehensive statesmanship 
will make the obtaining of revenue from import duties 
secondary to the promotion of the corresponding in- 
dustrial interests of the country, and will so legislate 
that three-fourths, if not more, of the adult population 
may have employment at living wages. Such would 
be the record of a government known only by its 
blessings. 



92 POLITICAL ECONOMY. 

79. A Phrase that Misleads. — The plausible phrase^ 
'^ Buy where you can buy cheapest, and sell where you 
can sell dearest/^ often misleads workingmen. On 
the other hand, genuine economy suggests, ^'Buy 
where you can pay easiest/' Honest men deem it is as 
important to pay as it is to purchase, and, therefore, 
with them to buy is also to pay. This phrase, more- 
over, applies to the exchange of the products of labor, 
and not to labor itself ; for instance, American wheat 
and cotton can be practically exchanged for the 
silk and fine cloths of Europe. On the other hand, 
our wage-earners in our great industries have only one 
commodity to exchange for what they wish to pur- 
chase, and that is their individual labor or the 
wages derived from it. But they can obtain employ- 
ment only in their own country, not abroad. For this 
reason, the home market is more important to them 
than the foreign. 

80. Judicious Legislation. — Judicious legislation 
enables the American people to act of their own free will 
in respect to their industries, and encourages com- 
petition at home among their own manufacturers, 
rather than between our own and foreign manufac- 
turers. Here is a wide domain, in which sixty-five 
million people whose varied and numerous wants are, 
for the most part, to be supplied from their own 
resources. Their desires are multiplied because of 
their being on a comparatively high plane of educa- 
tion, which, in the main, receives its impulse from the 
common schools. 



WAGES AND SAVING S. 93 

They are also accustomed to the comforts of life, 
since they are able to obtain them at fair prices by 
means of their labor at fair wages. The consequence 
is, that in the aggregate they require a higher grade of 
articles to satisfy their ordinary demands, and the re- 
sult is, these millions with their facilities for earning 
wages afford an immense home market for their own 
industrial products, which are increased and varied in 
such proportion as to satisfy their mutual wants. 
A population thus constituted will have almost an in- 
finitude of desires to be gratified. After that is accom- 
plished, the surplus products are sent abroad to be 
exchanged for whatever the people may desire; it may 
be high-priced luxuries in various forms, or products 
of foreign lands, which they themselves cannot produce 
owing to climatic influences, such as tea, coffee, 
chocolate, and the spices of the tropics, all of which 
are essential for the comfort of the household. The 
usual surplus has been found sufficient thus far to 
obtain these desirable commodities. 

81. High Wages and Savings.— True economy rea- 
sons that it is better for workpeople to have high 
wages and pay higher for what they need, than have 
low wages and buy cheaper in proportion. Under this 
condition, unless unusual mishaps occur, they ought to 
have a surplus at the end of each year, which, in the 
nature of things, would be higher with high wages 
than with low. The tendency of competition in the 
United States is to lower the price of manufactured 
articles necessary for comfort more than that of labor. 



94 POLITICAL ECONOMY. 

and thus it is found that in consequence of home com- 
petition^ domestic manufactures are made at fair 
prices. No other workpeople in the world appear to 
have so great an amount of their earnings deposited in 
savings-banks as the American, which is evidently the 
result of industry^ economy and temperance, as well 
as of their receiving higher wages than are paid in 
Europe. 

82. WhatjGroverns the Price? — To illustrate, suppose 
the railways in the United States require twelve thou- 
sand tons of steel rails, of which the American manu- 
facturers can furnish eight thousand at the rate of, 
say, forty dollars a ton, the price being graduated by 
the cost of production, the prominent item in which 
is i\\Q fair rate of wages paid the workmen. To sup- 
ply the deficiency, four thousand tons must be obtained 
abroad. The English manufacturers, for instance, can 
put the same class of rails on the American market at 
twenty-six dollars a ton, owing to the low rate of 
wages paid their workmen. It requires no more heat 
nor fuel to smelt the iron ore and make the rails in 
England than in the United States, while the less cost 
in the former of providing the fuel, the machinery, etc., 
may be assumed to equal the extra expense of freight- 
age across the Atlantic, so that the rails can be laid 
down in our market at twenty-six dollars a ton — the 
cost of their production. The government now inter- 
poses, and levies upon each ton, as property brought 
in for sale, a duty of fourteen dollars ; thus making 
the two classes of rails equal in cost, the American 



MODE OF LIVING. 95 

rails being the greater in quantity evidently regulate 
the price, and the duty of fourteen dollars is appropri- 
ated as revenue to aid in defraying the expenses of the 
National government. By this policy the wages of our 
own workmen are kept up, and we are also able to util- 
ize our own resources of coal and iron-ore. 

83. To illustrate farther : the price of the steel rails 
is not increased to the American consumer beyond 
what is fair in the cost of production, for, in the nat- 
ural order of things, the greater amount in the market 
regulates the current price. The many million bush- 
els of wheat produced in Dakota fixes their price, and 
not the comparatively few pecks raised in Maine. The 
sixty-four million tons of bituminous coal taken in one 
year from the immense deposits in the Union deter- 
mine its price, and not the comparatively few scuttle- 
fuls imported from Nova Scotia. Thus the home pro- 
duction, when it is the greater in amount, determines 
the price to which the foreign article is made to 
adapt itself by means of a judicious tariff, and thereby 
the right of our own workpeople to enjoy living 
wages is recognized and protected, 

84. Mode of Living. — The standard of living among 
the workpeople of the United States is much higher 
to-day than ever before — this may be said especially of 
the natives born of natives — and with it is induced a 
higher tone of self-respect, since they are on a political 
equality with their employers, a relation, strictly 
speaking, that obtains nowhere else in the world. 



96 POLITICAL ECONOMY. 

They have become accustomed to the liberal use of 
good^ substantial food^ and to having suitable cloth- 
ing and to comfortable homes^ which they very often 
can and do render attractive by tasteful adornments. 
It is natu.ral and right that they should Avish to per- 
petuate these comforts, which are luxuries to their 
work-brethren beyond the Atlantic. The standard of 
living has its variations, yet in the main it is gradually 
becoming higher in tone as the people advance in edu- 
cation and refinement. All that the American work- 
people ask of legislation is that it does not discriminate 
against their interests, but gives them a fair chance to 
compete among themselves for success rather than with 
cheaper foreign workmen, and they will trust their 
own energy and skill to secure a competency. There 
can be two classes of competition within the United 
States; the one domestic, among our own manufactur- 
ers in their various lines, and the other the foreign 
competition — that is, when manufacturers from abroad 
place in our own market articles similar to those made 
in our own land. Under these conditions the com- 
petition becomes equally fair for both parties to put 
their selling price at any percentage of profit they 
choose. The domestic manufacturers can thus com- 
pete with one another, and to this fair competition 
they generously admit on equal terms the foreign com- 
petitor. The revenue is secured to the National 
government, while in respect to the selling price, 
either party can exercise his own judgment. . 



XIII. 

WAGES. 

85-90. Different Names for Wages.— The term wages 
is usually applied to the compensation for the labor of 
those who are hired by an employer ; the former having 
no interest in the business other than to perform their 
duty as employes^ and receive their pay for the same. 
The class of workers who have but little skill are much 
greater in number than the skilled and are usually 
engaged by the month, the week, the day, and under 
certain conditions, by the hour or by the job. There 
are, also, other classes oi employes of a higher grade 
of intelligence and mechanical skill, who receive corre- 
sponding wages for service performed. They are found 
in the employ of corporations for carrying on extensive 
business, such as manufacturing, mining, and in the 
various modes of transportation by sea and land. 
There are presidents, secretaries, superintendents, 
clerks, bookkeepers, etc., to perform whose duties 
requires more education and mental exertion, and who 
are under a greater responsibility. Their remunera- 
tion is classed under the head of salaries ; and they are 
engaged usually by the year. In this class are also 
included teachers, clergymen and civil officers. Lawyers 
and physicians receive their wages under the name of 



98 POLITICAL ECONOMY. 

fees. Still another class who act as agents, frequently 
receive their remuneration in commissions on the 
amount of merchandise they may sell. 

In mechanical industries the workmen sometimes 
do piece-work and receive their compensation accord- 
ingly. Upon the whole, the fair remuneration for 
labor in all its forms becomes a difficult question to 
solve, as there are involved so many diversified interests 
pertaining to employers and employes. 

86. Real and Nominal Wages. — There are many con- 
tingencies connected with wages, and in consequence, 
distinctions are made as to real and nominal wages. 
"Nominal wages is the price of labor, simply expressed 
in money ; while the real wages are estimated by the 
amount they will purchase of the necessaries of life, or 
even of luxuries, which add to the comfort of the wage- 
earner. Circumstances often occur when the nomi- 
nal wages — that is, so much money — will not purchase 
a corresponding quantity of the commodities that the 
workman may wish for his family, because the latter 
have advanced in price, while the wages have remained 
the same ; sometimes the reverse of this occurs, 
when prices of commodities have become lower. The 
rate of wages appears to change more slowly than 
the price, be it high or low, of the necessaries of life. 
Thus, after the discovery of gold in California (1848) 
the food products rose much quicker in price than 
did the wages of those employed. The former was 
caused by the sudden influx of gold, which thereby be- 
came cheaper, and so more of it was required to pur- 



WAGES. 99 

chase a bushel of wheat; but gold was the standard 
by which the nominal wages were estimated, and in 
consequence the same amount of wages could not buy 
as much wheat as formerly. In time these discrepan- 
cies adjust themselves ; both parties, the employers 
and the employed, are tenacious and equally slow to 
make a change. The one when wages are low oppose 
a raise ; the other when wages are high resist a 
reduction. 

Another instance of this kind occurred soon after the 
close of the Civil War, when the expansion of the cur- 
rency had caused a great increase in the cost of living. 
The employers desired the old rates, of wages to remain. 
Meanwhile a change in their rate was progressing 
till eight or ten years later that rate had reached a 
high point; but already a change in prices had taken 
place, and the profits of manufacturing had fallen off, 
while the cost of living had greatly diminished. The 
employers to save themselves wished to lower their 
expenses by reducing the price of labor, but the work- 
men now strenuously opposed any change in their rate 
of wages, and for that purpose sometimes resorted to 
a strike. There appears, in theory at least, only two 
remedies for the peculiar evils incident to fluctuations 
either in wages or in the price of commodities. One 
is by means of a sliding scale by which the rate of 
wages is graduated by the selling-price of the article 
manufactured, the other by genuine cooperation, where 
both the capitals of money and of skill and muscle are 
mutually interested in the general prosperity of the 
corporation. 



too POLITICAL ECONOMY. 

87. Evils of Speculation.— Sometimes other influ- 
ences cause the prices of commodities to rise, though 
such rise may be injurious and outside the natural 
order of trade. This occurs when speculators bring 
about an inflation of prices by securing a large amount 
of some commodity — as wheat for instance — and with- 
hohling it from market in order to induce a scarcity of 
the article, and thereby enhance the price and secure 
to themselves the profit even at the expense of the peo- 
ple who are in want of the food. This great wrong is 
carried out much more easily in respect to commodities 
which are the product of agriculture, since their defi- 
ciency cannot be supplied by production in less than a 
year, but in the case of manufactured articles, the evil 
can be remedied in a comparatively short time. 
Though speculation may for a brief time stimulate 
production, and thus incidentally increase wages, such 
advance is short-lived; reaction soon occurs, and in the 
end it is injurious to the workmen themsleves. Specu- 
lation cannot increase wealth; for what one speculator 
gains another loses. 

88. The Mode of Payments.— It is proper to notice 
the manner in which payments are sometimes made for 
labor. Though the contract in respect to the wages 
may be reckoned in money-value, there are often con- 
tingencies that interfere with the purchasing power of 
the stipulated wage-price. For illustration, if the 
workman is employed by a corporation that also has a 
store, he may be obliged by contract to buy his house- 
hold necessaries by means of orders on the store> 



WAGES. 101 

instead of receiving his wages in money, and purchas- 
ing for cash wherever it is for his advantage. In the 
former case he is liable to be imposed upon by having 
to pay exorbitant prices. In many instances the laws 
of the State come to the relief of the employe, and 
ordain that the payment of his wages shall be made in 
money, and then he is at liberty to make his purchases 
where he pleases. 

89. Conditions that Affect Wages.— There are many 
circumstances that affect the wages of those who engage 
in mechanical industries. Some trades can be carried 
on only at certain seasons of the year ; for instance, brick 
can be made only in the summer ; neither can bricks or 
stones be laid in a wall in very cold weather lest the cold 
should freeze the mortar and destroy its adhesive prop- 
erty. Many industries can be prosecuted within doors, 
such as that of cabinet-makers, carpenters or shoe- 
makers, etc. Those who work at trades that can be 
carried on only about nine months in the year, such as 
bricklayers or stone masons, usually receive more wages 
in proportion for the time being than those who have 
employment during the full year. Both classes must 
live for a year on the wages thus earned, the one by work- 
ing nine months the other by working twelve. The 
advantage in the main is with those who have continu- 
ous employment. Though the wages received may be 
somewhat less day by day, yet in the aggregate it is bet- 
ter, since the workman has regular occupation for 
the year, and is more likely to acquire habits of 
industry. 



102 POLITICAL ECONOMY. 

An emjoloyment that is pleasant in its surroundings 
does not command as high price as that which is disa- 
greeable, unhealthy, or dangerous. Men would prefer, 
even at lower wages, work that is in accordance with 
their tastes to that which is repulsive. As a general 
rule, miners who work underground demand and 
receive higher wages than those who work on the sur- 
face, though the former have no more skill nor make 
greater exertion. Some kinds of employment require 
a longer apprenticeship or preparation than others. 
The former justly command better wages, there being 
in that case fewer competitors in consequence of the 
limited number who are willing to make the proper 
exertion for qualifying themselves. Certain mechani- 
cal industries require an unusual amount of skill and 
muscle and mental ability, and to prepare for such 
positions often takes years of toil, to undergo the 
drudgery of which, only a few comparatively are will- 
ing. In consequence the wages of that class of work- 
men are high. 

90. Wages are often affected by the relations exist- 
ing between the employer and the employed, as when 
the latter is a confidential clerk, and likewise when 
upon the carefulness of the employed great interests of 
property and even of human safety depend, as in the 
case of the engineer who superintends the engine in a 
manufacturing establishment, on a railway train or on 
board an ocean or river steamer. In a community 
where the range of industries is very limited, the wages 
are correspondingly low. On the other hand, where a 



WAGES. 108 

large number of industries are carried on, there is 
greater room for employment, and in consequence, the 
wages will be higher. 

Political economy suggests that a great diversity of 
employments in a community would stimulate its mem- 
bers to greater exertion in order, in a proper and legiti- 
mate way, to secure good wages. This diversity has the 
effect of elevating the industrial tone of the whole 
community and rendering its members in a measure 
more intelligent by directing their attention from one 
phase of industry to many. Such conditions would 
induce a greater diversity of thought among the indi- 
vidual members of these various industries, and excite 
an interest in one another, more than if they all took 
the same monotonous path in their occupations. 



XIV. 

WAGES CONTINUED. 

91-97. Intelligence an Element of Success. — It is essen- 
tial that a well-equipped workman be able to read and 
write as a means for progressing rapidly in skill in 
whatever employment he may be engaged. The bet- 
ter his mind is trained the more successful will he be, 
and the more certain of remunerative wages. He will 
be the more competent to fulfill his duties as a me- 
chanic, if with his intelligence and skill he unites dili- 
gence in his work, and economy and temperance in his 
habits. He will take pleasure in mastering the intri- 
cacies of machinery, and will be on the lookout for im- 
provements and ready to utilize them when 'presented 
by others. He will not drone from day to day in a dull, 
stupid longing for the time to pass, but will spend the 
hours of labor cheerfully, realizing that he is much 
happier when performing his duty in his regular voca- 
tion. It is remarkable that in the United States very 
numerous improvements have been made in machinery 
at the suggestions of our intelligent workmen, while in 
addition almost unnumbered original inventions have 
been produced by the same class. Such men command 
good wages and are a blessing to their country. 

It is a pleasure to every patriot to note the interest 



WAGES CONTINUED. 105 

that is more or less pervading the instruction in the 
public schools in some of the States in training pupils 
to usa their eyes and their hands. Such knowledge 
will have an important bearing upon the next genera- 
tion of mechanical workers. The pupil thus taught 
acquires the habit of observation/ and he easily trains 
his hands to obey his will in his work, and in conse- 
quence he the sooner becomes an expert workman. 
When a pupil qualified in this manner enters upon 
learning a special trade, these habits aid him im- 
mensely in making progress. Young men thus started 
in their duties of earning a livelihood are encouraged by 
the expectation of success. They labor cheerfully and 
their time does not hang heavily on their hands. The 
hope of reward applies more especially to American 
youth, since to them the path to success is open, if 
they themselves perform their duty. They stand on a 
plane of political equality with their employers, and 
their intelligence, when connected with integrity of 
purpose and self-respect, gives them influence. 

92. The Numbers of Wage "Workers. — It is clear that 
the great majority of adults among any civilized people, 
must earn their living by working for wages, to which 
rule American citizens are not an exception. The ma- 
terial progress of our Nation would be retarded, if not 
ruined, were it not for the investment of money-capital, 
in such manner as to give employment to the great ma- 
jority of those who are wage-earners. Common-sense 
and prudence teach that every young man and woman, 
with scarcely an exception, should learn some mechanic 



106 POLITICAL ECONOMY, 

art or trade consistent with their circumstances. In 
this changing world riches often takes wings because of 
unforeseen influences. Among the American people 
labor of some kind is deemed respectable. This senti- 
ment among intelligent and industrious workingmen 
may lead them to enter upon a system of cooperation. 
The attention of the intelligent public is now directed 
to the subject of the union of money-capital and cap- 
ital in the form of mechanical skill in the production 
of manufactured articles. To bring that system to per- 
fection requires financial as well as mechanical skill, and 
in both integrity of purpose in order to secure sucaess. 

93. Income from Joint Exertion. — Complaints are 
sometimes made by workmen engaged in American 
mechanical industries, that the incomes derived from 
the money-capital are greater in proportion than the 
reward which labor receives from the joint product. 
That is, when the workmen compare the amount of 
their wages with the dividends of the employer, 
their incomes appear small. It is proper to recognize 
the fact that this money-capital is as much the 
result of labor as the present wages of the workman — 
but it is labor previously performed, the wages for 
which have been saved, and the aggregate is now 
made available for investment. The income from this 
is as justly due the owner of to-day as were the wages 
due the original workman. If the conditions of the 
two periods of time are analyzed, it will be found that 
the present employe receives, all things considered, for 
a similar amount of work quite as large if not larger 



WAGES CONTINUED. 107 

wages than the original workman, who in the course of 
time, by being industrious, temperate and econom- 
ical, was enabled to invest in such manner that he 
himself became a capitalist and an employer. The 
path to success was open to him, and a similar one is 
now open to the workman whom he employs. In the 
divine arrangement, each one has his chance and turn. 
The one of to-day may not reach the ideal that he has 
marked out for himself, but none the less should he 
perform his duty to his employer, and to his own fam- 
ily by training the latter to honest industry and econ- 
omy. In the end such principles of integrity may 
lead them to positions even higher than the one to 
which he himself aspired. 

94. The Contingencies of the Two Classes of Incomes. — 

In relation to their respective incomes the employed 
may be inclined to ignore some of the most influential 
items in enumerating the conditions under which the 
dividends of the employer are obtained. The latter 
include the salary of the owner; the interest on his 
money invested (the result of former labor); the risks 
that he runs; the mental anxiety and care; the liability 
of accidents to his property; the rent, insurance, the 
wear and tear of machinery, and the uncertain condi- 
tions of the market — all these unknown quantities 
must be met and provided for before he can draw his 
dividends. On the other hand, the workman has some- 
thing sure in his wages, the income from his skill and 
industry, without the responsibility of the manage- 
ment, or the contingency of financial failure that might 



108 POLITICAL ECONOMY. 

involve him in debt and blight his prospects for life. 
Under such conditions, is not the workman remuner- 
ated in proportion to the value of his capital fully as 
much as the employer? 

95. The Cost of Living. — It is just to every workman 
that his wages should afford him and his family a com- 
fortable living, and in addition, at the end of the year 
he should have a surplus to lay by as savings to provide 
for the necessities of old age when his working days 
are over. It is essential that workpeople, in order to 
perform their duties successfully, should have whole- 
some food to sustain their physical strength and vigor; 
a home pleasant in its surroundings and free from im- 
purities ; and withal, clothing that is suitable for the 
proper protection of the body at all times. Cheerful- 
ness and hopefulness are important elements in the 
success of the worker in any occupation, and to secure 
these the wages should be sufficiently high to repay more 
than the mere expenses day by day. Every patriotic 
statesman desires that the mechanic who labors should 
receive sufficient wages, so that with the aid of common- 
sense-prudence he can live respectably and enjoy the 
privilege of keeping his own household in comfort, and 
at least give his children a fair and practical education 
to enable them, when necessary, to support themselves. 

Owing to the progress by means of machinery in 
cheapening the manufacture of textile fabrics and 
almost all articles that increase the comfort and 
improve the taste of the people, the standard of living 
has been raised among American work-people to a 



WAGES CONTINUED. 109 

degree that is unknown to their brethren beyond the 
Atlantic. It sometimes happens that the style of living 
indulged in by families of employes requires more funds 
than are earned by their workers. Under such circum- 
stances to indulge in mere luxuries is a crime against 
honesty and ought to wound their own conscience and 
self-respect. No member of society can have true self- 
respect, if, in consequence of such self-indulgence, he 
becomes involved in debt to his neighbors. 

96. Incidental Influence on Wages. — It is reason- 
able, if a business in which wage-earners are employed 
is successful, that in consequence the wages should be 
greater in proportion. For illustration: if there is an 
unusual demand for iron and steel, their price is en- 
hanced, their manufacture receives a corresponding 
impulse, more workmen are needed, and, perhaps, 
more rapid work required to meet the contingency. 
It is right that under such conditions the wages 
should be increased in proportion to the value and 
amount of the product. This is on the supposition 
that those who are employed as workers have no inter- 
est in the proceeds further than to perform their work 
properly and receive their pay, and that it rests with 
the employer whether he will share a portion of his 
profits with his workmen in the form of an increase in 
wages. This general principle is recognized, though 
the employers are often loth to raise wages when their 
profits have a fair increase, and the employes are 
often equally loth to have them reduced when the 
profits of the employer are declining — both parties are 



110 POLITICAL ECONOMY. 

ungenerous and selfish. The Golden Rule would sug- 
gest that if the product of a certain article is in de- 
mand at good prices, the manufacturer should tender 
an increase of wages to his employes ; and, on the 
other hand, if the demand for such articles should fall 
off and the price decline, the employes should cheer- 
fully assent to a proportional decrease in their wages. 

97. The main influence in determining the rate of 
wages is the price which the products of the special 
labor commands. If that price does not fully remuner- 
ate the capitalist he is right in curtailing his expenses, 
and, if need be, in stopping his factory entirely. We 
cannot expect the capitalist to invest his money where 
he would lose it ; neither would we expect the employe 
to work for nothing. When business is unprofitable 
the owner can exercise his right and close his factory 
and wait for better times. He will let his machinery 
stand idle, though it keeps in better order if con- 
stantly running. Under the circumstances, he would 
be imprudent to court financial ruin by the continuous 
drain of paying daily wages. His machinery lies idle, 
and so does the skill and muscle of his late employes. 
The conclusion is, that wages are determined by the 
profits of the industry, and, if the latter are good, the 
wages increase ; if they are meagre, the wages decrease. 
There is an intimate sympathy between the grade of 
the profits of an industry and the amount of wages that 
can be fairly paid those employed in that industry, and 
their proper adjustment requires mutual good-will and 
wisdom in both parties — the employers and the employes. 



XV. 

WAGES COKTINUED. 

98-103. A Geographical Comparison. — Political econ- 
omy, when it takes into consideration the varied in- 
dustries of the United States, properly recognizes 
geographical facts that are comparative. For illustra- 
tion: the estimated area of the Union — excluding 
Alaska — is only a few hundred thousand square miles 
less than that of all Europe, though in the former the 
amount of fertile territory available for cultivation and 
pasturage is far superior to that of the latter. The 
United States lies wholly within the temperate zone, 
extending from within half a degree of the Tropic of 
Cancer to the 49th parallel, while Europe extends from 
the 36th degree of latitude to beyond the Arctic 
Circle, and has a very large territory bordering on 
both sides of that line, which, in consequence of the 
climate, is almost valueless for pasturage or culti- 
vation. In addition, within the area of the Union are 
deposits of thg^ precious metals, while those of Eu- 
rope, in comparison, are scarcely worth naming; yet 
the contrast is still as striking between the more valu- 
able minerals — coal and iron, petroleum and natural 



112 POLITICAL ECONOMY. 

99. l)iversity of Industries Aifected by Climate. — It 

follows from this comparison that in the United 
States there is ample room for diversities of employ- 
ments or industries, owing to the extent of the 
territory and the corresponding differences of climate. 
These numerous industries, when carried on success- 
fully in different localities, benefit all classes of the 
workpeople by enhancing their wages, and thus pro- 
curing for them the comforts of life. The American 
people are likewise preeminently fortunate in their 
facilities for distributing to consumers throughout the 
Union the product of their labor in consequence of the 
easy intercourse between the different sections of their 
country by means of navigable rivers, sea coasts and 
railways. These advantages 'greatly promote trade 
among the States of the Union, " and as greatly add 
to the comfort and happiness of the people, which is 
free from tariff restrictions that are found often in 
Europe within a similar extent of territory, occu- 
pied by many different people, having diverse inter- 
ests. 

100. The diversity of climate also induces varied 
forms of industry among the American people. In the 
Middle and the more Northern portions the industries 
that pertain to the various forms of manufacturing 
that must be carried on within doors, prevail almost 
exclusively, and yet in this region, extending across 
from ocean to ocean, is the great wheat belt of the 
Nation. In the South-Middle and still more Southern, 
the fertile soil invites to its cultivation and pours forth 



WAGES CONTINUED. 113 

in abundance its products of tobacco, cotton, sugar, 
maize or Indian corn, and semi-tropical fruits. This 
country extends north and south over twenty-seven 
degrees of latitude; from east to west, across the con- 
tinent on the fortieth parallel, it covers one hundred 
and thirty degrees of longitude. Thus, there are 
within the limits of the Union all the productions of 
the earth that are essential for the sustenance and 
well-being of the people ; the only exceptions being tea 
and coffee, chocolate, and a few spices, which they 
may desire to complete the comfort of their households 
when seated around their tables. Various forms of 
industry prevail in this vast territory, such as the 
manufacturing or mechanical, the mining in some por- 
tions, and the agricultural in others; and yet the 
factory is oftentimes found in sight of fields of wheat 
and Indian corn. 

101- Competition Affects Wages. — Competition in 
general terms is defined as a ^^ common strife for the 
same object." This strife crops out continually in the 
ordinary business affairs of life. Competition in busi- 
ness always influences wages. One management is anx- 
ious to secure workmen and it offers higher wages than 
the contending rival. The latter, to protect itself, 
offers still better terms; thus the contest goes on until 
both reach a uniform high rate. The workmen are 
benefited by this competition which of itself is limited 
to the rival corporations, but their advantage is only 
temporary, as the unusually high wages come down to 
their natural level, when the work is finished and the 



114 POLITICAL ECONOMY. 

contest ended. In this manner the rate of wages, in- 
stead of being steady and normal, often fluctuates to 
such an extent as to be injurious. 

102. Competition sometimes assumes different 
phases, though it continues to affect the rates of wages, 
but only to lower them. This is the case when there 
happens to be a surplus of workmen in the market, 
who, competing among themselves to obtain employ- 
ment, are willing to take lower wages. Another element 
often intervenes. The corporations or employers have 
frequently an eye only to the profits that may be de- 
rived from their capital, and, as a means to an end, tliey 
pay their workmen as low wages as possible — their 
greatest expense or outlay being in that direction. On 
the other hand, the workmen wish to secure as high 
wages as possible. They are both right in their desire 
for remuneration, but that desire should not prevent 
their being just, so that neither party would take advan- 
tage of the necessities of the other. The result of sucb 
wage-difficulties is often a compromise in the form of 
a contract between the parties, in which neither one is 
perfectly satisfied. 

The sum of the matter is that when employers are in 
competition with one another, they will pay their work- 
men higher wages; while on the other hand, when the 
workmen are in competition among themselves, they 
will sell their labor cheaper, rather than be without 
employment. Thus it follows that '^ the lowest price 
at which any laborer will sell his labor, is the highest 
price which any employer can afford to pay.'' 



WAGES CONTINUED. 115 

103. Other Results of Competition. — Competition has 
its good as well as its bad points. Its influence often 
breaks monopolies that for a time bear hard upon the 
people^ especially upon those who are less able to pay 
the prices which a monopoly may impose. Such a 
state of the market is a great grievance, the more espe- 
cially, if it affects the price of articles that are of prime 
necessity. Competition steps in opportunely and by 
joining in the production of similar articles in due 
time brings the monopolists to terms by forcing prices 
down to a reasonable rate. That end accomplished, 
it should be prosecuted no further, but remain as far as 
possible at what may be termed the financial position, 
in which labor is fairly paid and the dividends on the 
capital invested are as fairly remunerative. 

The injury caused by injudicious competition is dis- 
played when one form of industry — say, the production 
of cotton cloth — becomes successful and its profits are 
at a fair rate and the employes also have living wages. 
Suddenly outside capitalists rush into the same in- 
dustry, establish more mills and make cloth to such 
an extent that the business is quickly overcrowded. 
The first curtailment of expenses is by reducing the 
wages of the employes in all the mills. There is no 
alternative ; for to carry on the business, the buildings 
and machinery must be retained and the raw material 
purchased. These outlays remain the same. Mean- 
while there has been an over-production and in conse- 
quence, the market is glutted, the consumers for the 
time being have been supplied, and the mills have an 
immense surplus stock on hand. Finally they shut 



116 POLITICAL ECONOMY. 

down; the employes for a time, at least, are thrown out 
of employment, or their wages greatly reduced; the 
weaker mills become bankrupt and the remainder are 
financially crippled. Such mishaps are the result of 
the lack of common-sense financial ability on the part 
of capitalists, who, if they had prudently examined the 
field beforehand, would have ascertained that the pro- 
duction of the original mills was sufficient to supply 
at reasonable prices the demands of the public, and at 
the same time give a fair remuneration to the em- 
ployes and to the owners. The same injudicious method 
often prevails in other fields of industry, not except- 
ing the agricultural. 



XVI. 

WAGES COi^CLUDED. 

104-112. Labor Unions Affect Wages. — Workingmen 
within recent years have taken measures to increase 
their wages and to promote their own general inter- 
ests. With these objects in view they have formed 
associations nnder the names of Trade Unions, Brother- 
hoods, Knights of Labor, etc. These were at first com- 
posed of the active members of some one particular 
trade or form of industry, but, as there was a sympathy 
in respect to wages among the workers in the various 
kinds of industries, some of these unions combined 
with those belonging to the employes in different fields 
of labor. This movement progressed so far that it was 
proposed, and efforts were made, though thus far only 
partially successful, to combine all labor unions within 
the United States into one vast association. It is not 
within the scope of this book to go into detail in rela- 
tion to these measures, but to treat the subject as one 
within the province of political economy. Labor or 
Trade Unions originated in England among her work- 
men, who designed by these means to increase their 
wages and make that increase permanent, and to pro- 
mote the interests of the members of their associa- 
tions. 



118 POLITICAL ECONOMY. 

105. The general plan adopted in the United States 
has been for the workmen in any particular industry to 
combine in an organization, having a constitution and 
by-laws which each member when signing pledges him- 
self to obey. The officers are in some instances author- 
ized to make arrangements for the members of the 
association with the employers, order strikes, to declare 
them off, etc. The strikes are ordered usually for the 
purpose of obtaining higher wages or shorter time for 
labor, which accomplishes the same purpose — that is, to 
cause the employer to pay more for the work performed. 
Strikes have sometimes been injudiciously ordered on 
frivolous pretexts, when the men themselves were satis- 
fied with the wages they 'received. For instance, the 
drivers on a certain surface railroad in the city of New 
York had difficulties with the management of that road, 
and refused to continue their work; the officers of the 
several unions ordered a " tie-up,^' or strike, on nearly 
all the other railroads in the city, though the employes 
had no grievances of which to complain. This absurd 
and unjust action did much to alienate the sympathy 
of a well-wishing public, who had been much inconven- 
ienced in consequence. In line with such proceeding, 
it often occurs that if the employers attempt to supply 
the places vacated by strikers by engaging men who 
are not members of a Union, the strikers sometimes by 
intimidation or even violence endeavor to prevent them 
from working. 

Strikes often succeed in raising wages, but they uni- 
formly fail when made on a falling market, for, if the 
prices obtained for the products of the mills are gradu- 



WAGES CONCLUDED. 119 

ally falling, even at the rate of wages already paid the 
operatives, how can the employers or owners in justice 
to themselves, pay more? Under such conditions the 
mills are forced to stop, and the strikers instead of 
having work at their old wages are thrown out of 
employment. 

106. Wages Raised by Wrong Measures. — When 
labor organizations increase their own wages by limiting 
the number of those who are engaged in that special 
industry, they infringe the rights of others, who may 
be equally skilled and willing to work, but who, for 
their own reasons, refuse membership in the Union. 
The latter may wish to fill the places that the strikers 
have vacated in order to provide, it may be, for their 
families, and, if the strikers prevent them by maltreat- 
ment or otherwise, they violate a sacred right that 
has its origin in justice to humanity and is recognized 
by human law as such. 

The most objectionable and supremely selfish phase 
of limiting the workers in their line is in preventing 
boys or young men from learning a special trade as 
apprentices. This mode of restriction is not merely an 
outrage on the young men themselves, but on the 
people at large, and as such deserves the condemnation 
of every humane being. These youths, thus debarred 
this privilege are forced to grow up in idleness, 
especially in the large cities, where innumerable 
temptations to wrong-doing abound, so that they 
often become victims of vices, that lead them to com- 
mit crime. 



120 POLITICAL ECONOMY. 

107. Mutual Duties and Rights. — The evils attend- 
ant upon such action on the part of the present 
generation of workingmen are far-reaching in their 
consequences, as the result will be in time a scarcity 
of skilled workmen, who are native born Americans. 
In order to secure the monopoly of employment 
for themselves alone, such workmen would selfishly 
prevent the younge;; men and boys learning trades or 
laboring in our mechanical industries. The members 
of a Union who work have a right to obtain a fair 
value for their services, and they are justified in taking 
proper measures to secure it. On the other hand, the 
employers have no right to violate contracts, even if 
they are only implied, nor arbitrarily lower the wages 
of those whom they have employed. Changes should 
be introduced only by mutual agreement between the 
parties. 

108. Aspirations for Success and Harmony. — It is 

hoped that these associations will yet act upon princi- 
ples more comprehensive than those which they at 
present advocate — that of mere increase of wages. 
The latter savors of selfishness rather than of a de- 
sire to promote organizations of labor which, in con- 
nection with capital, can raise the grade of the 
mechanical industries of the land to a standard of 
excellence far in advance of what it is now. 

109. Industrial Partnerships are a form of cooper- 
ation. The corporation enters into an agreement to 
furnish the plant, the current capital, etc., and pay a 



WAGES CONCLUDED. 121 

certain amount of wages to each individual employe, 
and in addition at the end of the year, after a certain 
percentage upon the capital invested has been realized 
by the owners, to divide the remainder among the 
workpeople. It would be a great gain if the rate in 
this division were based upon the sliill and the labor 
performed by the individual so that such a mode of 
disbursement might become a continuous stimulant for 
honest effort among the workmen, making them care- 
ful to avoid waste, and to perform perfect work. It 
would also, no doubt, induce a kindly feeling between 
tJie parties to the contract, while securing an interest 
in the success of the enterprise and an emulation on 
the part of every one to perform his or her duty. 

110. Wages of Women. — This is to-day an impor- 
tant and living issue and one that also deserves notice 
in a work on political economy. Within the last quar- 
ter of a century woman^s sphere of labor in the United 
States has been greatly increased. The first and most 
influential impulse in this direction was given at 
Washington (1863) under the auspices of Salmon P. 
Chase, then Secretary of the Treasury, who employed 
great numbers of intelligent women in counting 
mone}^, and as clerks, stenographers, copyists, etc. 
They were found remarkably competent for that class 
of work, and the system was extended to the other 
departments where similar work was required. This 
example at Wasliington has had influence throughout 
the Nation, and now retail merchants, importers, 
bankers, lawyers, publishers, etc., employ an increas- 



122 POLITICAL ECONOMY. 

ing number of women. The work required of them 
demands more mental preparation than can be obtained 
in the ordinary common school. A still higher educa- 
tion is required for teachers^ trained nurses and 
physicians. 

111. The Rate of Woman's Wages. — The proportion- 
ate smallness of wages paid women seems to be the out- 
growth of the custom, which prevailed in times bygone, 
when she was comparatively not as well educated as to- 
day; but that custom in the main has been much mod- 
ified in her favor. The rate of her compensation is, 
however, generally lower than that of men for similar 
work. This seems to be unjust, and yet those who 
employ women and are friendly to their interests con- 
tend that, while these inequalities exist in the wages 
paid men and women in similar industries, men 
though they have not the natural quickness of women, 
are more enduring and are not so liable to be occasion- 
ally absent and are more likely to be permanent. In 
the case of the lady, she may at any time step up to the 
desk and hand in her resignation, because she is about 
to enter upon the more appropriate sphere of a wife and 
the care of a household. Employers argue that under 
the circumstances women cannot have that sense of 
responsibility that would induce them to give the same 
continuous attention in order to master the details of 
their work, as if they had entered upon a kind of labor 
that was to be indefinite in its length. 

Another reason is that the particular spheres of labor 
in which women can work successfully are quite lim- 



WAGES CONCLUDED. 123 

ited, and the applicants very numerous^ so that taking 
the regular course with them as with men, under simi- 
lar conditions, their wages are in consequence lower. 

112. ^^In the quiet sphere of domestic life, woman 
renders to society her noblest, most blessed service. 
The real worth of that service cannot be estimated in 
terms of current money. Its legitimate reward comes 
not in separate wages but in her rightful partnership, 
as a necessary helper, in all that man, the husband, the 
father, the brother, quickened, stimulated, sustained by 
her genial influence in the home, can gather on the 
world^s open fields of struggle. When necessity carries 
her out to act for herself in those open fields, her 
true mission will still remain that of a Helper not a 
Principal. The outlook of to-day is full of hope for the 
success of a Conservative Reform, which shall move on, 
safely balanced by a due regard always to that highest 
honor, to those most sacred rights of woman which cen- 
tre in the true unit of society, the home." (Dr. Way- 
lancl.) 



XVII. 

A HOME MARKET. 

113-125. As a home market is of printary impor- 
tance to our workpeople, it is fitting that it be noticed 
in immediate connection with the item of wages. To 
supply the wants of a Nation of 65,000,000 people, who 
taken as a whole, are accustomed to the substantial 
comforts of life, requires a vast number of those who 
work for wages. In consequence of this urgent demand, 
their wages, when compared with those paid beyond 
the Atlantic, are high, because this home market is al- 
ways sure, since the American people are dependent, 
upon foreign countries for perhaps not one-fiftieth 
part of their substantial comforts. 

They have within their territorial limits, almost inex- 
haustible mines of the precious metals, coal and iron, 
a marvelously fertile soil, and a copious rainfall, derived 
from a source that will remain as long as the present 
laws of nature exist. Being in these respects indepen- 
dent of the outside world, they virtually have one of 
their own. 

After their home market is supplied, the surplus is 
sent to foreign lands to be exchanged for what they 
desire, which — owing to low wages paid abroad and to 
climatic influences — they cannot produce themselves. 



A HOME MARKET. 125 

The wages of these numerous workers are enhanced 
by the ever-recurring wants of the people in the differ- 
ent sections of the land. The primary motive is to 
strengthen the home market by supplying all the essen- 
tial articles needed by the people, when it can be done, 
by means of domestic manufacturing. The elements 
from which come our sustenance and wealth are pro- 
vided to our hand by the bounty of a beneficent Creator, 
and why should we not avail ourselves of His gifts, and 
utilize them, first of all, for the benefit of our own 
people ? 

114. Advantages of a Home Market. — The home mar- 
ket is more valuable because it is less fluctuating. The 
progress of the country is uniform and the increase in 
the number of the people is steady. The settling of 
unoccupied territories and bringing them into accessibil- 
ity by means of railways continue unabated, thus add- 
ing to the class of agricultural producers who, at the 
same time, increase the market for our own manufac- 
tured goods. This immense interior trade affects favor- 
ably the wages, among others, of those who are employed 
in distributing to the people the untold products of the 
ranches, the farms, the plantations, the mines of all 
kinds and the workshops of the Union. 

There are no other people on the globe, that demand 
so much for their comfort and good living as do those 
of the United States. Every intelligent patriot rejoices 
that it is thus, not only because of the refinement and 
taste which demands such comforts, but because it also 
implies corresponding industry to obtain the means for 



126 POLITICAL ECONOMY. 

comfortable living. That being the case, there is 
greater security as to employment for wage-earners, 
and also for their obtaining fair compensation. The 
industries of the United States, aided by the general 
intelligence of the workers, are unusually productive, 
and in consequence the wages of those employed in 
them are correspondingly high. From the nature of 
certain conditions — such as the partial failure of crops 
abroad, or a sudden influx of the precious metals from 
our mines — fluctuations in prices of merchandise may 
occur, as well as in wages. The employers and the 
employes being both interested, these financial difficul- 
ties in due time adjust themselves. 

115. The Values of Foreign and Home Markets Com- 
pared. — The importance of the home market or trade 
within the Union can be illustrated by the following 
statement. We ascertain the amount of our foreign 
trade by reckoning the money-value of our imports, 
as well as that of our exports to pay for them; and 
the two represent the value of our foreign trade. In 
1890 the latter amounted in value, as we learn from 
Custom House reports, to 11,634,604,237, while the 
yearly amount of the home trade between the States 
is estimated by those who have made the subject a 
study to be 130,000,000,000, nearly twenty times as 
much. This great boon of a free Home Market was 
secured to the American people by the far-reaching wis- 
dom of the fathers, when in the Constitution they 
forbade that trade between the States should be re- 
stricted by impost duties. 



A HOME MARKET. 127 

There is quite a contrast in the relative importance 
of the home market of Great Britain and that of the 
United States. The vahie of the exchanges within the 
home, or ^'Imperial Market," of England is estimated 
by Mr. Gladstone to be 1935,000,000 a year, '' taking 
in imports and exports of all kinds — whereas the 
foreign commerce amounts to 12,770,000,000" — virtu- 
ally three times as much. Mr. Gladstone urges, that 
'''it would be a most inglorious policy " for the English 
government to sacrifice the larger foreign commerce, 
for the smaller ''Imperial" or domestic. Cannot 
American statesmen as well say, '' it would be a most 
inglorious policy," to sacrifice their much larger Home 
Market for a smaller foreign one ? In England, espec- 
ially, manufacturing of every form has for its primary 
object to supply a foreign market; in the United 
States, on the contrary, the primary object is to supply 
the wants of the American people — the Home Market. 

116. The manufacturers and merchants of Europe, 
of course, are anxious to occupy our immense home 
market. The Americans ask. What can you give us in 
exchange ? The virtual answer is. We can send you 
our manufactured goods but we cannot in exchange 
take yours of similar character, for in that respect we 
supply ourselves abundantly, and, owing to the lower 
wages we pay, cheaper than we can obtain them from 
you. We will take your wheat and flour, when our 
crops fail or when we cannot obtain them cheaper from 
Russia or India, and we will take a portion of your 
Indian corn and other provisions. The Americans 



128 POLITICAL ECONOMY. 

reply. Since we are excluded from your market because 
of the superabundance of your own manufactures, we 
will fall back upon those commodities for which you are 
more or less dependent upon us, that is, the surplus of 
our wheat and flour, our Indian corn, and the various 
forms of food provisions; and also upon our petroleum, 
cotton and tobacco. In exchange for these we will 
take what we want of your high-priced articles which 
are deemed luxuries, such as textile fabrics of cotton 
and wool or silk of elaborate make. In respect to the 
cheaper and more useful class of manufactured goods 
— woolen, silk and cotton — we can supply ourselves 
from our own factories. 

117. Europe's Advantage in Population.— Europe 

with her estimated population of 315 millions can have 
but little need, as we have seen, for American manu- 
factured products, since her workers in mechanical 
industries are so much greater in proportion to the 
number of the inhabitants than in the United States. 
It follows from this condition that Europeans from 
their own resources, can supply themselves with manu- 
factured products while, because of the low rate of 
wages they pay, the Americans cannot compete with 
them, especially in their own markets. To this gen- 
eral rule there may be, occasionally, an exception in 
some special articles, as occurred some years since in the 
items of sewing-machines and of American clocks and 
watches — the latter two being made, for the most part, 
by ingeniously contrived machinery. The Americans 
must, therefore, seek an outlet for the surplus products 



A HOME MARKET. 129 

of their mechanical industries among peoples not so 
far advanced in similar pursuits, as for instance in por- 
tions of Asia or among their neighbors, whose terri- 
tories extend southward from the Rio Grande. 

On the contrary, the people of certain nations of 
Europe must depend to a large extent upon the grain 
and pasture-lands of the Northern and Middle portions 
of the United States for their supplies of breadstuffs, 
orchard fruits and other classes of provisions. The 
same people are equally dependent upj3n petroleum, 
and the tobacco and cotton of the Southern portion of 
the Union. The surplus of these commodities the 
Americans find sufficient to exchange for what they de- 
sire of the various luxuries to be obtained in the Old 
World. 

118. The American People Mutually Dependent. — 

Owing to the extent of their territory and, in conse- 
quence, diversity of climate the American people of 
the different sections of the Union, are much depend- 
ent upon one another for the necessaries and comforts 
of life and to such a degree that even the several sec- 
tions might be looked upon in respect to mere trade as 
foreign. For illustration: That portion of the Atlantic 
slope known as New England, with its numerous man- 
ufacturing industries, might in this sense, be deemed 
a foreign land, by the portion west of the Alleghenies, 
while the extreme South, with its cotton and sugar and 
semi-tropical fruits, may be reckoned another for- 
eign land — but as one people under the same conditions 
of free trade among themselves. The manufactured 



130 POLITICAL ECONOMY. 

articles of New England are purchased by the North- 
west, and the latter pays for them in wheat, Indian 
corn, beef and other provisions ; in the same manner 
the South purchases the products of the New England 
factories and pays in sugar, raw cotton, and semi-trop- 
ical fruits — and they all buy more or less of luxuries 
from Europe and pay by means of their respective prod- 
ucts. An English writer on political economy has 
characterized the United States as " a continent of 
free-trade, unequalled in the world," This is accom- 
plished by means of a cordon of custom houses in the 
seaports and along the Canada and Mexican bounda- 
ries, whose province it is to guard the industrial inter- 
ests of the people,'and at the same time obtain revenue 
from import duties to defray the expenses of the 
National government. 

119. Mutual Interests. — Another important influ- 
ence that increases the value and the indepen- 
dence of this home market is the mutual interests of 
both the wage-earners and the employers in the indus- 
tries of the Union. If one of these decline or cease, 
those at work therein are compelled to crowd into other 
occupations, and thus, by competition, they lower 
their own and the wages of the others. Herein is the 
theory at fault, which under the plea of mere cheap- 
ness, Avhich always means unrequited toil somewhere, 
would transfer to the workpeople of Europe the man- 
ufacture of those articles which our own people can 
make for themselves. 

The American who makes hats cannot afford that his 



A HOME MARKET. 131 

neighbor wlio makes woolen cloth should give up work, 
at the dictation of free trade, in order that he, the 
hatter, according to the theory, may buy a coat a little 
cheaper, nor can the cotton spinner afford that the silk 
weaver should stop work that the former might pur- 
chase a silk dress for his wife a little cheaper. True 
and honest economy includes the paying as well as the 
buying, and these two can be combined, when indus- 
tries are diversified and all are successful, insuring em- 
ployment and wages to those employed, and fair 
dividends to the capital invested. 

120. The Two Interests Maintained.— How the two 

interests, protecting American mechanical industries 
and at the same time obtaining the necessary revenue, 
are provided for may be thus illustrated: Suppose a 
manufacturer in Lowell, Mass., puts on the New 
York market a quantity of Merrimac prints. In pro- 
ducing them he has paid his workpeople one thousand 
dollars. A manufacturer in Manchester, England, at 
the same time puts on the same market a like quantity 
and quality of prints, but he has paid his workpeople 
only five hundred dollars — the average wages paid in 
England being one-half as much as that paid in the 
United States. The National government interposes 
and says to the foreigner. We will impose a duty of five 
hundred dollars on your consignment of Merrimacs, 
thus making the wage-cost of the two articles of mer- 
chandise equal. Under these conditions, we welcome 
you to compete on our own soil with our own manufac- 
turers, and to sell at whatever percentage of profit you 



132 POLITICAL ECONOMY. 

please. Thtis the foreign manufacturer pays the duty, 
and in return has the privilege of entering the Ameri- 
can market. 

121. What Common Right Have Manufacturers?— 

In a similar manner in respect to other classes of mer- 
chandise brought in 'for sale, the government by tariff 
legislation guards the interests of its own capitalists 
and workpeople. The American manufacturers exer- 
cise the natural right of all producers in every land to 
name the price of their own products when they put 
them upon the market. That price, all things being 
equal, is governed by the cost of production. The 
European, however, has the advantage, inasmuch as he 
pays only one-half, in some instances, as in the silk 
industry, only one-third as much wages as does the 
American, and therefore, the United States govern- 
ment in justice to its own manufacturers is bound to 
levy a duty sufficiently high to afford them, in 
their own market, a fair chance in competing with 
the foreigner. Moreover, the American manufacturer 
graduates the price of his own products independently 
of that of the foreigner for similar articles. The 
latter conforms to the price laid down by the former, 
and not the reverse. Neither, under these conditions, 
is the price increased by the introduction of the foreign 
made article, though it pay the required duty. Sup- 
pose, in the case of the Merrimac prints just noted, 
the foreigner demands a higher percentage of profit 
than does the American; the latter will not increase 
his price in consequence, but, on the other hand, if 



A HOME MARKET. 133 

the foreigner asks a percentage of profit lower than 
that of the American, the latter in order to compete 
successfully must bring his price down to the same 
standard. In no case after the foreigner has paid the 
duty and entered his merchandise on the American 
market, can he increase the current price, but, on the 
contrary, if he finds it to his interest, he may lower it 
by asking for his goods a less percentage of profit than 
does the American. 

122. Who Pays the Duty? — The question who pays 
the duty on an imported article — the importer or the 
consumer — can be easily and correctly answered when 
the conditions of the importation are fully under- 
stood. 

For illustration: At present the United States gov- 
ernment imposes no duty on tea and coffee; the 
original price of these articles is imposed by the foreign 
ex23orters, say in China or Brazil. The American 
consumer purchases them, paying only the usual profit 
due the importer and the retail dealer. But suppose 
the United States government should impose a duty of 
four cents a pound on the coffee and ten cents on the 
tea. The consumer would then have to pay in addi- 
tion four cents more a pound on the coffee and ten 
more on the tea. In that case the consumer would 
pay the duty; that is, he would* refund such amount to 
the retail dealer as had been paid originally by the im- 
porter and charged by him to the latter, who, in turn, 
charges the same to the consumer. This principle of 
the American consumer paying the duty applies only 



134 POLITICAL ECONOMY. 

to instances wherein they do not produce the article at 
all — such as tea^ coifee, chocolate, etc., and wherein 
the foreign exporter fixes the original price to which is 
added the duty. 

Another phase of the question presents itself in 
this connection. Who pays the duty on articles that 
come into our markets in competition with our own 
products? The American manufacturer or farmer, in 
the case adduced, names his price on his own products. 
For illustration: Take the item of barley; the American 
farmer fixes his price, say at one dollar a bushel, but 
just across the border the Canadian farmer has also 
raised barley which he wishes to sell in the American 
market, but the government imposes a duty of thirty 
cents on a bushel of foreign barley. The Canadian 
pays the thirty cents and puts his barley on the Ameri- 
can market, and sells it at the stated price, one dollar, 
for he cannot sell it at a higher rate. Thus he realizes 
only seventy cents, since he has already paid a duty of 
thirty for the privilege of putting his barley on that 
market. This principle holds true in every case 
wherein the American names the price on his own 
product, the foreign competitor paying the duty. On 
the other hand, when the foreign manufacturer or 
planter names the price on his product, which we can- 
not produce at all, we, the American consumers, pay 
the duty, if one is imposed by the National govern- 
ment. 

Inter-State Commerce Act. — The immense traffic within 
the home market caused rivalries between the great 



A HOME MARKET. 135 

lines of railways leading from the grain fields and past- 
ure lands of the West to the cities and seaports of the 
East. The managers of these roads often discrimi- 
nated in favor of their customers along the portions of 
their routes where competition was rife by '' cutting 
rates/' both for freight and passengers; then^ on the 
other hand, to make up the loss of income thus 
incurred, they charged, where there was no competition, 
exorbitant rates for freight and passengers. These 
customers appealed to the National government for 
relief, and to remedy the evil Congress passed the 
" Inter-State Commerce Act." The United States Com- 
missioners under this Act were empowered to regulate 
such railways rates, and make them equable and just to 
the citizens of all sections of the Union. 

123. The Main Object of Commerce Is Not to Obtain 
Money. — Political economists at one time advocated the 
system known as the mercantile, which was understood 
to mean that trade among nations should have for its 
chief object to obtain money — gold and silver — from 
which theory it followed that the nation which held in 
its vaults the greatest amount of the precious metals 
was deemed the richest. Experience and statesman- 
ship have long since taught a different lesson, namely, 
that the true wealth of a nation consists in the ma- 
terial progress, the education, the morality, the com- 
fort and the happiness of the people themselves. This 
truth is exemplified in a Christianized civilization, 
wherein the rights of all are protected, and, in conse- 
quence, an open field is afforded in which each in- 



136 POLITICAL ECONOMY. 

dividual can fully exercise his or her talent^ whatever 
it may be, but in such manner as not to interfere with 
the rights of others. 

Commerce is now deemed a means by which the 
products — agricultural, mechanical, or mining — of one 
portion of the country or of the world, can be ex- 
changed for the products of another, and thereby 
satisfy the desires and add to the comfort of the par- 
ties concerned. The American merchant, for illustra- 
tion, sends a cargo of flour to Rio Janeiro. He does not 
want in exchange for it gold or silver, but coffee, which 
he may sell at a profit and at the same time supply the 
wants of his countrymen. If he exports more flour 
than he wishes to exchange for coffee, and the Brazil- 
ians take it, they can pay him the difference in gold or 
he may take some other of their products, as India rub- 
ber. The amount of the precious metals paid out at 
the present time in the commerce of the world is very 
insignificant in value when compared with that of the 
vast amounts of products thus exchanged. 

124. The Two Methods of Regulating the National 
Revenue. — When it is expedient to diminish the income 
of the government that is derived from import duties, 
one class of political economists advises placing on the 
free list or at least lowering the rate of the tariff upon 
many commodities in common use which we can make 
ourselves. Another class takes a view directly the 
reverse; that is, to increase the rate of the tariff on 
the same class of articles, and thereby diminish the 
importation itself. The argument for the latter 



A HOME MARKET. 137 

policy is that it gives employment to its own. work- 
people in manufacturing these or similar articles for 
themselves. The latter class of economists is also 
strenuous in imposing a high tariff upon luxuries that 
come in from abroad^ and the wealthy^ whose tastes — 
right in themselves — lead them to possess and enjoy 
such luxuries, greatly benefit the finances of the 
Nation at large while paying for them by reason of the 
duties imposed thereon. 

125. The Nation Homogeneous. — The American peo- 
ple, those descended from the original stock as repre- 
sented by the colonists, are remarkably homogeneous. 
This realized fact elicits a kindred feeling or sentiment 
that pervades every portion of the land and thus 
promotes our domestic free-trade. Another character- 
istic that may be deemed peculiar in its beneficial influ- 
ence is the ease with which foreigners, as a general rule, 
and their descendants assimilate with the natives in 
loyalty to American institutions — civil and religious. 
Foreigners, on certain conditions, are admitted to citizen- 
ship, while their children are taught the English 
language and the elements of a good education in our 
public schools. Under such influences these youth 
grow up into manhood and womanhood and become in 
fact and in spirit genuine Americans. The whole 
people are inspired by self-reliance; are umtrammeled 
by a sentiment of an artificial caste in society, and in 
a political sense are on an equality. Inequalities as 
to mental powers and physical strength exist among 



138 POLITICAL ECONOMY. 

individuals; these characteristics the Creator — for rea- 
sons that we cannot gainsay — has stamped upon each, 
but under such conditions, that every one in the 
Union has an open field for success, in the sphere to 
which he or she is adapted. 



XVIII. 

EENT. 

126-137. — It is only among a savage or semi-savage 
people that land is held in common. On the con- 
trary, among all civilized nations it is universally held 
by individuals, except the comparatively small portions 
set apart for public use. That this mode of possessing 
land is of divine origin, we infer from the command 
by which the land of Canaan was distributed in cer- 
tain portions to the lieads of families among the chil- 
dren of Israel. In addition it was even ordained, that 
if misfortunes overcame the family, and their land 
was alienated because of debt, in the year of jubilee 
the homestead was restored to the heirs of the original 
owners. 

127. Titles to Land. — In accordance with this gen- 
eral principle, the individual person in the United 
States can own land and transmit it to his or her heirs; 
the person having in a legal sense, ^^a title in fee 
simple, ''^ — that is, free from any encumbrance, such as 
entail, which obtains in England. That system was 
never entertained in our country after the Revolution. 
All the immense grants of land made to royal favorites 
in colonial times, when we became a Nation gradually 



140 POLITICAL ECONOMY. 

dwindled away, by passing into the ownersliip of indi- 
viduals. The si^irit of our institutions is antagonistic 
to large landed estates; and the few exceptions, that 
hitherto have been very large, have uniformly in the 
second or third generation passed into the hands of 
comparatively small farmers. The system of land 
holding in the United States not being complex, the 
mode of arranging for the rent derived from the .same 
is very simple. ' 

128. Definition of Rent. — In the restricted sense 
employed in political economy, Be?it is defined as 
money paid for the use of natural agents belonging to 
another, as land including its common qualities. The 
rent or income derived from minerals, water-power, 
etc., that may be on the land is usually subjected to 
special agreements. In common language, the term 
also applies to other forms of property, as when we rent 
or hire a house and its appurtenances, or a piano, etc. 

The rate of the rent of land in rural districts is 
graduated by its estimated value for farming purjDoses, 
in which value is considered, its fertility, its location, 
near to or remote from market, and the social character 
of the neighborhood in which it is situated. No 
upright and intelligent father wishes to subject his 
family to the influence of ignorant and vicious sur- 
roundings. Many questions are to be considered in 
renting or purchasing a farm: is its soil fertile by 
nature or is it sterile? can it be improved by fertiliz- 
ers? is it well watered by springs or brooks? is its lo- 
cation beautiful and commanding? 



BENT. , 141 

129. Differences in Lands. — Lauds differ in their 
capacity for producing crops. In one district wheat 
can be raised better than any other grain; another will 
produce Indian corn to better advantage than either 
wheat or oats; another yields tobacco of fine quality, 
because of particular elements in the soil, which that 
fastidious plant uses as food. Neither do these several 
districts, from year to year, yield equally well the grain 
to which their soil is adapted. These peculiarities are 
often found within a short distance from one another. 
Nature has established an almost infinite variety in 
the soils — some are clayey of different qualities; in 
some that invaluable element, lime, predominates; or 
they may be duly mixed with sand; the latter may de- 
generate into the coarser kinds so as to become 
gravelly; others are characterized as loamy and some 
alhivial. Some of these produce abundantly the 
small cereals, as wheat, rye, oats or buckwheat; others 
Indian corn, our only indigenous grain, or yield the 
invaluable potato. Some are adapted to grasses or 
pasturage for stock of different kinds, -others to fruit 
raising; perhaps a district almost useless in producing 
cereals will yield an abundant crop of that prince of 
the orchard, the apple, and other fruits, the peach, the 
plum, the cherry, and also will cause the grape, which 
is so sensitive as to the soil in which the vine is 
planted, to flourish and produce fruit of fine flavor. 
These considerations present themselves to those who 
are deciding upon the amount of rent that would be 
just and equal. 



142 POLITICAL ECONOMY. 

130. The Limit of Products. — One principle under- 
lies the rent of agricultural lands^ because under the 
most favorable conditions the product reaches a limit, 
beyond which the laws of nature forbid it to go, and 
the most perfect mode of cultivation by means of fer- 
tilizers and extra labor cannot force the yield beyond 
that limit. At that point the rent must remain, as 
beyond it all extra labor and efforts are a waste of 
power and capital ; nature being inexorable in dictating 
the extent of her productions. Political economists 
characterize this limit of yield as '^ diminishing 
returns.''^ 

131. Ground Rent. — In cities, land in the form of 

building lots is sometimes leased for a term of years, 
usually twenty-one, and the payment therefore is 
known as ground-rent. As a general rule when the 
lease expires it is subject to renewal, but at a rate 
which has been perhaps enhanced meanwhile by the 
prosperity of the surroundings, towards which often- 
times the owner by his enterprise has contributed noth- 
ing. In that case the benefit accrues to the latter 
alone ; but the lessee finds year by year the value of 
his building deteriorating from age and use, while his 
ground-rent is on the increase — thus to him the loss is 
two-fold. The system upon the whole appears by no 
means an economical one for the lessee. If the location 
is valuable for business, that feature materially in- 
creases the rent. 

132. The Degrees of Value in Land. — The two most 



BENT. 143 

essential elements in the value of land, and conse- 
quently in the rent, are the fertility of the soil and the 
facilities for reaching a market. In the United States 
these facilities, when not found in nature in the form 
of water courses, are often made by internal im- 
provements, such as wagon-roads, canals and railways 
— the latter in our day have brought. within reach of 
the Eastern cities the grains and other products of the 
Western plains. In consequence of this the value of 
the lands of the great West has been much enhanced ; 
their fertility and easy cultivation over-balancing the 
extra expense of transportation to the distant East and 
sea-board. 

133. In these new regions labor commands a high 
price, but the richness of the native soil enables the 
farmer to meet this extra expense, the land yielding a 
crop so large that the surplus is great, and the money 
invested pays a fair rent or income to the owner. The 
expense of breaking up the prairie lands in the valley 
of the Mississippi is small when compared with the 
labor required in other portions of the country where 
the forests of immense trees have to be removed before 
the land can be brought under cultivation. The proc- 
ess in the latter case is expensive and slow, and the 
farmer can prepare only a few acres in a year, while in 
the former, the sod of the prairie can be turned over 
rapidly in the spring, and in numerous acres, the seed 
put in and a crop reaped in the autumn. 

134. Effect of Population on Rent. — The growth of 



144 POLITICAL ECONOMY. 

population and its concentration in great centres or 
cities, stimulate agriculture to supply these multitudes 
with food, and the farmers are usually rewarded 
by fair prices for the numerous products of their 
fields. These include not merely the wheat, 
which is apt to have assigned it a supremacy above 
any other grain, but likewise the Indian corn so 
invaluable in its uses, direct and indirect, the rye, the 
oats, the barley and the buckwheat; his orchards 
also bear fruits, his fields abound in potatoes, and his 
pasture-lands give forth several dairy products, while 
the value of his poultry-yard is not to be overlooked — 
all these unite in increasing the surplus and the 
rent or income derived from the land. The garden 
is a small farm devoted to the cultivation of a class 
of vegetables that, in their nature, are quite perish- 
able, and therefore require a market near at hand, 
as they cannot be transported very great distances. 
The garden-farmer usually reaps for his labor a rich 
reward, and for the comparatively small portion of the 
land he cultivates, his rent or income is large. 

135. Contingencies of Land-Holding. — It is found 
that, usually, the rent or income from land or real 
estate, except in very favorable locations for business, 
as in certain portions of a city, is smaller in propor- 
tion than the same amount of capital would produce 
invested in other kinds of property or business. For 
this peculiarity the reason assigned is that property in 
land is very secure, there being no special risk in rela-- 
tion ta its ownership. The title can be verified with- 



ItENT. 145 

out difficulty or doubt, for in civilized countries, it is 
made a matter of legal record in public documents. 
The boundaries of the land, be it farm or lot, are care- 
fully designated and recorded, so that its ownership 
can be ascertained, and it can be transferred to other 
owners or to heirs. 

136. To possess land seems a universal desire in the 
human mind. This trait may account for the fact that 
in all ages landholders appear to have had more influ- 
ence than the owners of the same amount of wealth in 
other forms. This sentiment shows itself in limiting 
the privilege of voting to landliolders, as was once the 
custom in England and for a time in some of our own 
States. The United States government, however, im- 
mediately after its inauguration, took a higher and more 
advanced position, and assumed that the right of suff- 
rage inhered in the individual himself as a man and cit- 
izen, and not in the amount of property he might own. 

187. The land remains, though there may be 
great changes in other respects. If the population 
occupying it increases, and commerce and industries 
flourish, the value of the land is enhanced in propor- 
tion. The latter feature may be slow in its advance, 
but in the end it is more lasting. Thus real estate is, 
upon the whole, the most stable kind of property, with 
only one drawback: in cities the exorbitant taxes 
that it has sometimes to bear in consequence of the 
expenses incident to them such as the water-supply, 
lighting the streets, police arrangements, etc. 



XIX. 

INTEREST. 

138-148. Interest is the money paid for the use of 
money borrowed. The money loaned is called the 
princiiJal. The percentage on the principal is denom- 
inated the rate, and the time specified is usually for 
one year, but the time for payments of the interest, as 
agreed upon by the parties, may be annually, semi- 
annually or quarterly; when the amounts are large the 
last is more common. In active business in the cities, 
loans are often made on call or only for a few days, but 
the rate of interest is much higher in proportion than 
for longer and stated periods. As a matter of conven- 
ience indebtedness, as represented by mortgages and 
notes to be paid in time, is reckoned in terms of money 
on which interest is paid. A farmer purchases a farm 
for $5,000, of which 13,000 are paid at the time of the 
purchase, and the $2,000 remain on mortgage; that is, 
he gives as security for its payment a lien on his farm, 
while he pays interest on the 12,000. The general 
principles of such transactions are similar — he may bor- 
row the $2,000, and pay the former owner in full for 
his farm on taking possession; he merely gives the mort- 
gage to another person, from whom he borrowed the 
money and to whom he pays the interest. 



INTEREST, 147 

The manufacturer borrows money to be used as cap- 
ital in carrying on his business, and thus promotes in- 
dustries. He confers benefits on the people by supply- 
ing their wants, while also he aids multitudes by afford- 
ing them employment. In this way the combined 
efforts of both parties — the competent utilizer of bor- 
rowed capital and the lender become beneficial to the 
community at large. 

139. Considerations in Making Loans. — Risks obtrude 
themselves in business transactions, and they very 
often determine the rate of interest to be paid. When 
the risk is very small or virtually none, the rate of 
interest becomes low, as for instance, in the case of 
United States bonds. 

Risks at sea are deemed more hazardous than on land 
— that is, money loaned on a substantial ship would de- 
mand a higher rate of interest than if loaned on a well- 
built house, as the former is more liable to be destroyed 
than the latter. The same principle is recognized in 
the style of houses or the materials of which they are 
made; brick or stone, in that respect, being preferable 
to wood. The location has influence also on the rate 
of interest, as when a house is in the vicinity of explo- 
sives, as gunpowder or dynamite; or in the neighbor- 
hood of old wooden buildings, or stables that have stored 
in them inflammable materials, such as hay and straw. 
It would be difficult to borrow money at the ordinary 
rate of interest on securities so liable to fail. The char- 
acter of the business makes a difference in the rate of 
interest on the money borrowed in order to carry it on. 



148 POLITICAL ECONOMY. 

If the former is hazardous, such as the manufacture of 
explosives, etc., the rate will be large. 

140. Another consideration is the personal charac- 
ter, industry and business capacity of the borrower ; 
these have much to do in determining the amount of 
risk that would be assumed in loaning him money to 
be used as capital in business operations. If he has 
been successful and shown business skill, that fact will 
strengthen his mercantile credit and enable him to 
obtain needed loans on reasonable terms; on the con- 
trary, if he has been unfortunate and made failui'es, 
and if the latter can be traced to a deficiency of business 
judgment, the risk will be deemed greater and in con- 
sequence the rate of interest will be increased. 

The custom of mutual endorsements is sometimes 
resorted to in order to secure loans. A number of bus- 
iness men endorse for one another on the principle 
that one good turn deserves another, and, by thus com- 
bining, obtain loans that would be impossible for them 
to secure separately as individuals. This leads to com- 
plications that often develop into financial disaster. 
For illustration: one of the number fails to meet his 
obligations, though they may not be great. His en- 
dorser cannot aid him; the evils accumulate; another 
and another of the combination are unable because of 
the first failure to meet their obligations; and they all 
may become bankrupt. The system is liable to result 
in widespread financial disaster, and upon the whole is 
too full of risk to be indulged in by prudent business 
men. 



INTEREST. 149 

141. Supply and Demand for Money. — The rate of 
interest is affected by the scarcity or abundance of 
money in the market. The phrase '*^ money is tight/^ 
implies that it is difficult to borrow it for investment 
or otherwise. Similar unwritten laws govern its rate 
as they do the price of other commodities; if business 
is brisk^ payments prompt^ and sales frequent, the rate 
of interest will rise. On the other hand, if there is lit- 
tle money to be loaned, while there is a great demand 
for it, the rate will increase accordingly. Should the 
risk be great, owing to adverse circumstances, the rate 
of interest will rise, as for instance, when there are 
indications of war between nations or civil commotions 
within a nation itself. These agitations affect the bus- 
iness relations of all parties, and contribute to throw 
distrust over mercantile transactions, and render cap- 
italists cautious. 

142. Prosperity in business or in manufacturing 
industries requires a large amount of money to carry 
them on, and such conditions enhance the value of its 
use as a medium of exchange, and the estimate of this 
value is soon seen in the increase of the rate of interest. 
Thus money fluctuates like any other commodity in 
accordance with the laws of demand and supply. In 
new countries the rate of interest is comparatively high 
because of the relative scarcity of money, as seen in 
our new States or Territories. In the more densely 
populated portions of the Union, as in the eastern sec- 
tions, in the cities and centres of commerce and manu- 
facturing industries, the rate of interest is lower, as 



150 POLITICAL ECONOMY. 

there is usually plenty of money to loan on reasonable 
rates when the security is satisfactory. 

143. Usury Laws. — Merchants or others who may be 
in straitened circumstances in money matters are liable 
to become the victim of usurers, who may take advan- 
tage of their distress to extort high rates. To guard 
against this evil laws have sometimes been made, whose 
provisions were designed to prevent extortion, and to 
punish the offender. Laws having this purpose in view 
may be properly applied in cases wherein attempts are 
made to collect more than the legal rate of interest. 
When notes are given without specifying the rate of 
interest the legal rate is all the maker is liable for. 
The law thus protects the unwary from extortion. The 
spirit of the laws of usury is continually violated in 
transactions in the form of call loans. 

144. It is objected that usury laws are injudicious 
and violate the plainest principles of business or trade. 
Since money is one form of property, the question 
arises. What right has the law to determine its value, 
when it prescribes the rate at which its use is to be 
hired? A similar rule is never applied to the value of 
other property, to wheat or iron for instance, or, indeed, 
to anything else. It is contended that such laws vio- 
late the inherent rights of property, and that it is con- 
trary to the common good that prices of commodities 
should be regulated by legislation. Yet it is obvious 
that the unwary and the unintelligent should in some 
measure be protected from rapacious money-lenders, 
as well as against swindlers. 



INTEREST. 151 

Usury laws produce injurious effects upon morals^ as 
they can be so easily evaded by the connivance or ac- 
tive participation of both the contracting parties — the 
borrower under the pressure of circumstances, and the 
lender under the influence of a grasping and heartless 
avarice. Upon the whole the tendency of such laws in 
their non-observance is to engender a spirit of disre- 
spect for law. 

145. Dividends and Profits. — These terms apply to 
the incomes derived from investments in stock-com- 
panies. Stock-companies are usually formed by the 
contributions of numerous persons who subscribe the 
amounts they wish to invest in the enterprise. These 
companies are incorporated, so that in legal form they 
can conduct their operations, some of which are very 
extensive. Their sphere of action includes establish- 
ments, among others, for manufacturing, mining, rail- 
ways, both building and operating, with transportation 
by river or ocean steamer; banking purposes, insurance, 
telegraphs, telephones, and other enterprises, in almost 
innumerable forms, covering every phase of human 
ingenuity and business energy. 

146. A company is formed at the instance, perhaps, 
of one or two enterprising gentlemen who have inves- 
tigated a subject. Persons subscribe the stock which 
for the sake of convenience is divided into the requisite 
number of shares, each usually valued at one hundred 
dollars. Each subscriber for his number of shares re- 
ceives a certificate of ownership, and thus he becomes 



152 POLITICAL ECONOMY. 

a member of the corporation and has a voice in the 
selection of officers. The latter usually receive salaries, 
and as directors, secretaries or managers, conduct the 
enterprise. The shares are held under the usual con- 
ditions of other proj)erty, and the owner can sell or 
transfer them. The accounts of the company are bal- 
anced as often as decided upon, usually semi-annually 
or quarterly. After all the various expenses are paid, 
the surplus — or profit — is distributed to the stock- 
holders in proportion to the amount of stock they each 
own. The money thus paid out is called dividends. 

147. When Liable to Risks.— These companies are by 
no means exempt from the contingencies that occur in 
business transactions; they may be well-managed or 
the contrary; there may have been room for the enter- 
prise in their special line, or there may not. The com- 
pany, if successful, pays good dividends, or it may have 
entered a field of manufacturing, that had been already 
sufficiently occupied, and by thus coming in it has 
overcrowded the market and in consequence has not 
been successful in disposing of its products. The stock- 
holders of a company thus injudiciously commenced 
may draw small dividends or none at all, or perhaps in 
the end lose the stock itself. 

148. When we analyze dividends we find that they 
combine two elements — the interest on the money 
invested and also the profit arising from such invest- 
ment as stock. The profits, strictly speaking, include 
the net proceeds or surplus after all the expenses have 



INTEREST. 153 

been paid. The stockholder has a right to the usual 
rate of interest on his money used as capital^ and in 
addition, he has a legitimate claim to his pro rata 
share of the earnings of that capital, and the two com- 
bined we call dividends. In such investments there is 
always more or less risk incurred by the stockholder, 
and thus his relation to the company involves more 
than a loaner of money, for he shares a certain respon- 
sibility. Should the corporation become unfortunate 
in its financial affairs, he would be liable to lose all his 
stock and perhaps, also, become responsible to some 
extent for the debts of the company. 

These great business corporations have conferred un- 
told benefits upon the world and especially upon the 
American people in promoting their manufacturing 
industries and the development of their natural 
resources. By concentrating the scattered capital of 
the country they have been able to make available these 
resources for the benefit of the people at large. 



XX. 

I 

EXCHANGE. 

149-159. We have treated of production by means 
of labor and the use of natural agents ; we will now 
speak of the process of supplying these products to the 
consumers or those who desire to use them — this is 
called exchange. After the wants of the producers are 
supplied, the surplus is sent to those who desire it; 
that is, one class of persons give what they do not 
need in exchange for what they want, and those mak- 
ing these exchanges are found in all portions of the 
civilized world. To accomplish this distribution of 
commodities involves almost innumerable and varied 
facilities of transportation by land and water; after- 
ward comes in order the more minute distribution in 
required quantities to individuals, all of whom have 
some other product of labor or its equivalent to give 
in return. In consequence of its magnitude the sub- 
ject of exchange holds an important place in the study 
of political economy. The entire process is very com- 
plicated in its numerous appliances, and is likewise so 
extensive in its ramifications, that it supplies the wants 
of the people of all civilized nations. 

150. Markets. — The market is an essential instru- 



EXCHANGE. 155 

ment used in the distribution of commodities, as it is 
the central position of different localities, where by con- 
ventional or mutual consent, the numerous classes of 
salable property are brought within the reach of those 
who wish to exchange their own products for those of 
others. In reference to nations there are two leading 
classes of markets — the home and the foreign — and 
tovv^ard these tend in direct or indirect lines all the prod- 
ucts to be exchanged. There is no manufacturer nor 
agriculturist, but in his business has an eye to what 
the completed article will be worth or what it will 
bring him in this centre of exchange, be it a yard of 
cloth or a bushel of wheat. 

151. What is Essential in Exchange. — It is essential 
that these exchanges should be of mutual benefit to 
tlie parties concerned. These may be in the form of 
barter, that is, of one article for another, or of one for 
many, according to their respective values; since to each 
commodity is assigned a value as the basis of the trade 
or exchange. The preliminary exchanges in the mar- 
ket may be between merchants whose business is to dis- 
tribute in detail the commodities to others. The 
system is very complicated, and involves not only ex- 
changes but numerous handlings of the original com- 
modity. The planter in Texas prepares the soil ; puts 
in the cotton-seed ; cares for it through all its stages 
of growth, its stem and its boll of fibre ; he picks and 
gins it, makes of it a bale which he sends to market in 
Galveston. Thence it goes on shipboard, it may be to 
Europe or to Boston, or to other markets. From Bos- 



156 POLITICAL ECONOMY. 

ton it goes to Lowell^ where the manufacturer spins 
the cotton into yarn, which is then woven into cloth, 
dyed and stamped, finally appearing in the form of a 
Merrimac print which is sent to another market, to be 
again the subject of exchange, till at last it reaches its 
destination and is made up and put to actual use as a 
gown. 

152. The Element of Value.— The estimated value of 
commodities tiiat are exchanged is an important ele- 
ment to be considered in this connection. The term 
value is used as already defined (page 25) in the sense 
oi purc]iasing-2J0iver — that is, what it commands for it- 
self in exchange. The accepted standard of purchas- 
ing-value is money, and we use the term j)rice to ex- 
press it. A bushel of wheat sells for one dollar and a 
bushel of corn for half as much, and on that basis of 
their relative values the exchange is made. This illus- 
tration applies to all exchanges of products of what- 
ever sort and wherever made. 

The value of one article must be relative as com- 
pared with that of another. The value of an article of 
use is estimated by its utility ; that is, its power to sup- 
ply a want or desire ; in one instance it may be to grat- 
ify a refined taste, as in the value put upon a painting, 
or it may be a more common want, in which the taste 
for the beautiful has no influence, yet the respective 
desires can be equally strong. 

153. There are in truth two elements to be consid- 
ered in estimating the value of a commodity — namely 



EXCHANGE. 157 

its cost and its usefulness. These two qualities are 
deemed inherent when value is estimated without ref- 
erence to contingencies, such as an unusual demand 
in connection w4th an unusual lack of suppl}'. The 
former enhances the exchangeable value of the article, 
and the latter greatly increases that enhancement, but 
the reverse takes place when the demand is not great 
and the supply is abundant. Prudent merchants care- 
fully take into consideration all the conditions of the 
market. The tendency of competition, when judi- 
ciously conducted,is to equalize the supply to the ordi- 
nary demand, and to be on the lookout for sudden 
contractions or expansions of either. 

154. Competition.— When competition is free, in 
due time it regulates exchange values of merchantable 
articles by an inexorable law. When the demand is 
great the selling-price is enhanced, then capital and 
labor finding an opportunity for profitable employment 
speedily produce the requisite supply. On the other 
hand, when the supply is greater than the demand, the 
purchasing-value of the commodity is diminished and 
capital and labor in that sphere of manufacture are not 
sufficiently remunerated. This state of the market is 
often the result of injudicious over-production, which 
financial common-sense ought to have provided against. 
Competition has the tendency to make cost the stand- 
ard of value, as when the facilities created by machin- 
ery increase the production more rapidly and at 
comparatively less exp)ense, the effect is to lower the 
price of the commodity. It is very often the lack of 



158 POLITICAL ECONOMY. 

foresight on the part of the manufacturers themselves, 
that these great fluctuations in the amount of articles 
produced occur, and also as a consequence their lower 
exchangeable value. 

Variations in Value, — The variations in value, how- 
ever, often depend upon other circumstances, as 
when the commodities are of an unusually perishable 
nature, such as fruits or fish that decay quickly or lose 
their freshness. On the contrary, commodities that are 
not so liable to perish nor depreciate for a reasonable 
time can be kept on hand till there is a demand for 
them. Usually, manufactured articles can be rapidly 
supplied in order to meet the wants of the people, 
because the facilities for their production are excep- 
tionally great. On the other hand, a short supply of 
food, such as the cereals, takes a full year in the course 
of nature to meet the deficiency, and in consequence 
the fluctuations in the value of food articles of prime 
necessity are greater and more lasting than those of 
manufactured goods of any kind whatever. 

155. The Necessity for Exchange. — It is clear that 
there would be but little progress in making available 
for man^s comfort the bounties of God in nature, if 
there were no exchanges of the products of labor. 
The members of a household cannot supply all their 
wants from the materials they have of themselves 
alone; they must depend upon others by means of 
exchange for a large portion of what they desire. 
This necessity pervades the households of all civilized 



EXCHANGE. 159 

communities and it promotes the greater comfort of 
the whole, since the members are mutually dependent 
upon one another, each one supplying a certain amount 
of his surplus to his neighbor. This mutual depend- 
ence is not limited to the narrow bounds of a neigh- 
borhood, but extends, especially, throughout our own 
INTation, and in numerous instances goes beyond and 
reaches foreign ones. The merchant comes in as the 
agent of both parties, and takes measures to collect 
from all parts of the world the commodities that are 
desired by his neighbors and customers. 

Thus we see that man as a social being, in the won- 
derful combinations that produce his comforts of life, 
depends very much upon his fellows, and even upon 
those far beyond his immediate vicinity; for this 
mutual dependence links in sympathy and interest all 
civilized peoples. The field of exchange covers the 
whole world, and by promoting commerce aids in the 
extension of civilization, and of almost every form of 
industry by which nations are raised to a higher grade 
of intelligence and refinement. 

156. The Effect of Exchange. — This interchange of 
commodities within the United States themselves 
induces a remarkable diversity of industries, in which 
the genius of the American people has full scope in 
utilizing the bounties of nature, while each individual, 
if judicious, can engage in that employment which is 
adapted to his capacity of mind or of strength. 
Though he produces but one article, yet he can ex- 
change it for the labor-product of others, which he 



160 POLITICAL ECONOMY. 

may need, and thus both parties are benefitted. This 
system of free exchange stimulates to labor. Were it 
otherwise there would be scarcely an inducement to 
practice industry, as its proceeds could not, to much 
extent, be made available for the workman^s own com- 
fort or benefit. On the other hand, when facilities are 
abundant for making exchanges in order to satisfy the 
desires of the people, all portions of society are stimu- 
lated to industry. This activity of mind and body 
induces a higher grade of civilization — the people, 
meanwhile, advancing in culture and refinement, 
their desires increase for articles that afford pleasure 
to their aesthetic tastes however diversified. 

157. Exchange within the Union. — There is no other 
nation in which the stimulus for the exchange of prod- 
ucts is so great as in the United States, there being 
within them a home market — free and untrammeled — 
for all the industrious inhabitants. The people are 
peculiarly homogeneous, nearly all the whites being 
derived from the Anglo-Saxon race, while immigrants 
of other races coming in soon assimilate with the na- 
tives. This may be said especially of their children, 
who through the influence of our public schools, wherein 
they are taught the English language, grow up to 
become genuine Americans. Our territory in extent — 
excluding Alaska — lacks not much more than the areas 
<-of the States of New York or Pennsylvania of being 
as large as all that portion of Europe which is available 
for cultivation or pasturage. We are one people 
under the same general government in which all have 



EXCHANGE, 161 

a personal interest, enjoy the same freedom, civil and 
religions, and are bound together by ties of a brother- 
hood hitherto unknown among a people so numerous. 
In our public schools, the English language — a bond 
of union and sympathy among the people — is taught 
all the children of the Nation. This is quite in con- 
trast with Europe, with her more than a dozen nation- 
alities, speaking almost as many different languages; 
having, when compared with our Nation, little sympa- 
thy with one another, but rather are they antagonistic, 
especially in their industries, as viewed by political 
economy. 

Our fertile soil, rainfall and sunshine, combined 
with the diversity of our climate, secure the produc- 
tion of the essentials for human comfort — the cereal 
grains and orchard fruits of the middle and northern 
portion; the semi-tropical fruits of tlie southern and 
the fibers — wool, flax and cotton. All these unite in 
making us a Nation independent of the rest of the 
world in respect to the essential comforts of life, while 
by exchanging our surplus with foreign nations, we 
obtain all we want of that which is produced outside 
our own domain — such as raw silk, tea, coffee, choco- 
late, spices, dyestuffs, rubber, gutta-percha, etc. In 
every portion of our land the inhabitants are free and 
untrammeled, and if they use the proper means can 
obtain employment and engage in the industries suit- 
able to the climate, their own surroundings and their 
personal inclinations. 

158. Exchange of Home Manufactures.— The com- 



162 POLITICAL ECONOMY. 

modities to be exchanged among our own people are 
not limited to the products of the soil alone, but in- 
clude those of the numerous mechanical industries 
that are carried on within our land, the manufacture of 
all kinds of fabrics that add to human comfort, as 
well as those pertaining to utilizing our storehouses of 
mineral wealth. The American people have the 
capital to invest and a population sufficiently numer- 
ous and intelligent and willing to be employed in 
making available for their own benefit their vast 
natural resources. We have within our own boun- 
daries the productions of the temperate zone, and also 
of the sub-tropical, and, by domestic exchanges and 
means of our surplus, we can obtain all we desire of 
the tropical. 

159. Exchange is Division of Labor. — The entire sys- 
tem of exchange in its complexity is one form of divi- 
sion of labor similar to that involved in the separate 
industries that combine to produce an iron steamship, 
a piano, or a sewing machine. These various depart- 
ments are dependent for their success upon one 
another, and in the end mutually confer benefits on 
the people at large. In conducting these exchanges 
different parties in divers ways devote their time and 
energy to the work. The term merchant in its several 
applications is used to designate the importer or the 
exporter; the wholesale and the retail dealers — the 
latter reaching the consumer directly — the agent, 
commission merchant and the jobber. Then come in 
the bankers, the brokers or dealers in exchanging 



EXCHANGE. 163 

money; insurance men or companies, and underwriters. 
Upon the whole, this system of exchange in the course 
of time, since the people are becoming more enlight- 
ened and their desires correspondingly increasing, has 
grown to be exceedingly complex, having many divi- 
sions and sub-divisions. Notwithstanding these diffi- 
culties in the way, all the parties concerned in the 
work are so interested in its perfection, that it is 
marvellous how quietly and effectively the wants of the 
people are supplied by this unique machine— known as 
exchange. 



XXI. 

MOKEY. 

160-170. In the early ages of the race, mankind, in 
obtaining what they wanted but which they had not of 
themselves, exchanged their surplus of other commod- 
ities for it. This class of exchange is known as bar- 
ter. In these early times barter answered the purpose, 
and the estimated values assigned the articles to be 
exchanged were agreed upon by the parties concerned. 
In process of time silver was discovered, and no doubt 
because of its beauty and brilliancy attracted atten- 
tion, but perhaps only to be worn as an ornament. 
The form of expression in the first recorded instance in 
which silver was used as a medium of exchange in a 
payment (Gen. xxiii: 16) shows that it had already been 
in use in trade and so long as to have become a 
recognized medium of exchange, for Abraham paid 
''four hundred shekels of silver, current ivith the 
merchant J^ 

161. Standards of Value. — The standard of value in 
exchange was not always in past ages, and among 
different peoples, gold and silver. They often adopted 
other metals. In Sparta iron was used, and tin in 
ancient Syracuse and also in Britain, and in modern 



MONEY. Kj.") 

times platinum in Russia, while among the earlier 
Greeks and Romans cattle appear to have been used at 
first as a medium of exchange or standard of value and 
afterward, when silver came into use so much as to be 
coined, there was stamped on it the figure of an ox or 
a sheep. The Latin word i^ecunia — meaning money — 
is evidently derived from the word pecus, flock or cat- 
tle. But as mankind advanced in civilization their 
wants became more numerous and complex; improve- 
ments increased in making articles that promoted their 
comfort. At length silver becoming more common 
was finally stamped by the respective governments and 
recognized at a definite value in exchange for other 
commodities. 

The value of the silver was estimated on the basis 
of its inherent properties; that is, it was worth of 
itself the value assigned it by the authority of the 
stamp, which only authenticated its weight and 
purity. Thus its value came to be the recognized 
standard by which the respective values of other 
marketable commodities were estimated, and this 
led finally to its adoption as a common medium 
of exchange. Silver thus became prominent in 
the more modern commercial world owing to its 
abundance. Subsequently the Spaniards obtained 
possession of Mexico (1521) and afterward of Peru. 
Since the discovery of gold in California (1848), that 
metal, being more valuable, say about sixteen times as 
much as silver, it in consequence became the leading 
medium of exchange or the basis upon which mer- 
chants estimate values. 



166 POLITICAL ECONOMY. 

162. Coinage. — As we have seen, silver was used in 
very early times as a medium of exchange, while gold 
is mentioned afterward in a similar relation, it having 
remained much longer undiscovered. They both were 
thus used because of their intrinsic value, and in time 
by general consent they were accepted as such in trade. 
Several reasons are given why these two metals are 
adopted in making exchanges ; one that they are vir- 
tually imperishable, their color and beauty being 
scarcely susceptible of tarnish. They can be easily 
distinguished from other metals ; they can be conven- 
iently divided into small pieces, each one retaining its 
value in proportion to its size. 

Large amounts of money-value in gold can be easily 
carried, owing to its small bulk. The combination of 
such qualities render these metals peculiarly adapted 
for a common medium of exchange in business. Two 
conditions — purity and correct weight — are essential in 
order to make these exchanges simple and easy in 
their operation. At first both metals had to be 
weighed, as was silver in Abraham^s time, while in re- 
spect to their purity there must have been much 
liability to fraud. When mankind became sufficiently 
civilized, these difficulties were obviated by the govern- 
ments coining the precious metals, thus securing not 
only their proper weight but also their purity. As 
representatives of their subjects or people, patriotic 
and just governments have no inducement to issue 
spurious coins, while it has no right or authority to 
assign purchasing-value to the precious metals — that 
depends upon other conditions. 



MONEY. 167 

163. Coinage in Ancient Times. — Herodotus relates 
that the Lydians coined money one thousand years be- 
fore the Christian Era, that is, eight hundred and sixty 
years after the time of Abraham. The assaying or 
testing of gold was introduced into Britain in a. d. 
1130. In a pure state gold and silver are both com- 
paratively soft and, if coined in their absolute purity, 
would soon become diminished in value in consequence 
of their decreased weight caused by the wear and tear in 
their circulation. Chemistry discovered that gold was 
hardened by being mixed with silver, and that the 
same effect was produced in silver when it was mixed 
with copper. In order, therefore, to protect as far as 
possible these metals from diminishing in weight when 
used as coin, they were both alloyed when preparing 
them to be minted. 

164. Coinage in Modern Times.— The American gold 
dollar contains 33.22 grains (troy) of pure gold in 
connection with 2.58 grains of alloy (silver); the 
gold dollar, therefore, weighs 25.8 grains. The Amer- 
ican silver dollar contains 371.25 grains of pure silver, 
to which is added 41.25 grains of alloy (copper); the 
silver dollar, therefore, weighs 412. 5 grains. In 
weighing gold coin, the alloy is not reckoned. The 
usual ratio of value between the precious metals is 
about one of gold to 15.988, or nearly sixteen of silver; 
that is, one ounce of gold is in value virtually equal 
to sixteen ounces of silver. The '^'standard weight'' 
is made up of the pure gold and silver, combined with 
their respective alloys — the latter being since 1837, 



168 POLITICAL ECONOMY. 

one tenth of either coin. Our three and five-cent pieces 
contain each 25 parts of nickel to 75 of copper; the 
cent is made of copper. In England, since 1816, the 
gold '^'sovereign" weighs 123.274 grains; it stands 
for the pound sterling, which is the national unit of 
English currency. 

165. In the United States, especially, circumstances 
have sometimes caused variations in the relative value 
of these metals, as w^hen there was a large influx of 
gold from California beginning in 1848, and from 
Australia commencing in 1851, and also after 1873, 
a similar influx of silver from Nevada. Formerly 
private persons could bring their gold or silver bullion 
to the mint and have it coined, at no expense, under a 
rule or law known as " free-coinage,^^ but by a law 
enacted in 1878, the Government no longer grants 
that privilege to citizens ; on the contrary, it purchases 
and coins its own bullion. One reason for the adoption 
of the latter rule is that the custom of free-coinage is 
so liable to be abused. For illustration : the coined 
silver dollar is in use, and bears the usual relative 
value to the coined gold dollar, when suddenly there 
occurs an unusally large output of silver from the 
mines. The owners of such silver bullion could demand 
under ^*^ free-coinage,^' that it be issued in dollars from 
the mint, every one of which would be below the gold 
standard in value. Notwithstanding this, debts could be 
legally paid in such dollars, and to the disadvantage of 
the creditor; but the Government by controlling the 
coinage can, to a great extent, prevent such disastrous 



MONEY, 169 

results. All European nations have adopted the same 
rule as to free-coinage. The legal ratio is one of gold 
to fifteen and a half in Europe^ while it is, virtuall}^ 
one to sixteen — that is, one ounce (troy) of gold is 
worth sixteen ounces of silver in Anierica. Since 
1873, owing principally to the immense output of the 
mines of Nevada, silver bullion, relatively to that of 
gold, has declined in purchasing power, and has varied 
so much that an ounce of gold has equalled in value 
even as many as twenty-two of silver. 

"Gold and silver are hardly competing currencies, but 
gold is rather the currency of capital and the whole- 
sale trade, and silver of labor and the retail trade, 
except in so far as bills and notes, large or small, 
may supersede both gold and silver." Baron A. Roths- 
child, as quoted by Prof. Denslow, says : " Whether 
gold or silver dominates for the time, it is always true 
that the two metals concur together in forming the 
monetary circulation of the world, and it is the general 
mass of the two metals combined -which serves as the 
measure of the value of things. In countries with the 
double standard, the principal circulation will always 
be established of that metal which is the most 
abundant." (Economic Philosojyliy, p. 364.) 

166. The Standard of Value — Coined money is recog- 
nized as a universal standard of value, and to this 
standard the price of all commodities conform. That 
being the case, exchanges can be made rapidly and 
accurately. By this means the products of all kinds 
of labor can be estimated and exchanges made. We 



170 POLITICAL ECONOMY, 

may suppose the farmer with a wagon-load of wheat, 
apples and other produce, going into the neighbor- 
ing village, in order to exchange the various articles 
of his load for the supplies he wants for his family. 
The market price of his wheat, apples, etc. is soon esti- 
mated in money value ; in the same manner the price of 
tea, coffee, calico or whatever else he needs, is estimated 
by the same standard, and the exchange is speedily 
made to the satisfaction of both parties. It is on a 
similar but vaster scale, that the commerce of the civ- 
ilized world is conducted. Money in this sphere of use- 
fulness is used in respect to values in a manner similar 
to a foot-measure or a mile in relation to distances; 
or the ounce or the pound in deciding the weights of 
substances. Gold and silver are the products of labor, 
as any other material that is prepared from the mine 
or raised from the soil, and must have cost exer- 
tion, while they have an element, that of utility, 
within themselves, which excites a desire for their 
possession. 

167. The labor saved by such a universal medium 
of exchange as gold and silver may be illustrated by 
a common occurrence in any of our commercial cities. 
A draws from the bank a ten-dollar gold piece or 
bank note. With it he pays a debt to B and B does 
the same to and so on till toward the close of 
business hours F deposits the same gold piece or note 
in the bank. That is, during the business day the 
gold piece or note paid five debts, or was exclianged 
that many times. We see from this illustration 



MONEY. 171 

that, in facilitating exchanges in the modern com- 
mercial world, money is a valuable labor-saving 
machine. It is essential that a medium of exchange, 
which serves as a standard of value, by which every 
commodity in the market is priced, must have that 
measure of value within itself. In other terms, gold 
or silver coined pieces, large or small, if there were 
no stamp on them designating them as coin, woukl bring 
the same price as simple bullion or uncoined metal. 
'' Only a thing of value can measure value. '^ While 
on the other hand the bank-note represents on its face 
the value of the gold called for, yet it is used just the 
same as a matter of convenience, but only when men 
have faith in its promises to pay. 

168. Bimetallism. — The two precious metals, gold 
and silver, are each used as a medium of exchange; 
the former being the more valuable takes precedence, 
while the latter becomes subsidiary or fractional and is 
used in payment of small amounts. The adjust- 
ment of the relative and respective values of the two 
metals was an outgrowth in the course of ages among 
the people in their commercial or trade exchanges, and 
as an expression of public opinion, laws came to be 
enacted fixing the already recognized ratio of value 
between the two. Thus bimetallism stands " for the 
legal use of both gold and silver in our coins, at a fixed 
ratio to each other. '^ The most valuable — gold — be- 
came a legal tender in the United States to any amount 
of debt and silver to a limited extent — ten dollars — for 
the same purpose. 



172 POLITICAL ECONOMY. 

169. Legal Tender is that which the law author- 
izes to be tendered in payment of existing debts; that 
is^ when a debt is owed and there is no specification as 
to the mode of payment. The law, therefore, does not 
interfere with contracts that are made as to other 
modes of payment. Under these conditions, the 
respective amounts of gold and silver when tendered 
must be accepted by the creditor ; for, if refused, the 
debtor is no longer legally liable though he may be 
morally. If both metals were legal tender to any 
amount great injustice might be done by payments 
being made in the cheaper, since the ratio of value 
between the two is subject to fluctuations. In small 
sums the amount of difference in the ratio of value 
between gold and silver is so little, that in ordinary 
trade it is not worth while to exact it, though in 
very large payments the aggregate amount would be 
worth reckoning. 

170. Fluctuations in the Value of Gold and Silver. 

— The ratio of value between gold and silver is liable to 
vary, but even the latter, when compared with the 
ratio of values between other commodities, is exceed- 
ingly small, while the recognized value of gold is won- 
derfully stable. If commercial nations would agree 
upon a uniform ratio between the two precious metals 
and use both in trade, making gold a legal tender for 
all payments and silver for a limited amount, it is 
thought that on this basis both metals could circulate 
very much to the advantage of commerce. 

More than one hundred years ago the output of the 



MONET, 173 

silver mines of Mexico lowered its value when com- 
pared with gold, then again the vast output of the 
gold mines of California and Australia (1849 and 1852) 
lowered its ratio somewhat in comparison with silver, 
and afterward the immense quantities of silver obtained 
from the mines of ]N"evada (1874) lowered its ratio with 
gold. Such are the natural consequences of large pro- 
ductions on the one hand and of small ones on the 
other. 

These fluctuations of value between the metals 
themselves scarcely affect the exchange in the ordinary 
course of business. They look more formidable in 
reports than in commercial transactions. At one time 
the United States had, strictly speaking, only a silver 
currency, but since 1834 they have had practically a 
gold one; that is, gold was used for large payments 
and silver for small ones; butin 1874 the United States 
adopted the single gold standard. The latter mode 
prevents, to a great extent, the influence of sudden 
fluctuations in the rated value of either metal. 



XXII. 

CREDIT. 

171-182. If we recognize that the confidence of 
man in man influences them in their business transac- 
tions, we shall not be surprised to find that success, to 
a great extent, is based upon that principle. It may be 
said that the whole fabric of a Christianized civiliza- 
tion rests chiefly upon the mutual confidence — trust in, 
as the word means — which the people have in one 
another, though there may be individuals in every 
community who have not the full confidence of their 
fellows — but these are exceptions. Upon this impor- 
tant element in society is based nine-tenths of mer- 
cantile transactions, from the simplest to the most 
complex and extensive. In an ordinary and simple 
trade confidence is required for the article purchased 
may be imperfect or the money paid may be spurious. 

This principle pervades all relations wherein persons 
are hired to perform certain duties, the perfect per- 
formance of which depends upon the integrity of the 
person employed. The farmer trusts the mechanic 
who makes or repairs his utensils; the merchant gives 
credit in expectation of future payment to the farmer 
or the mechanic who purchases goods at his counter, 
and both these have confidence in the fair dealing of 



CREDIT. 175 

the merchant himself. This mutual confidence in the 
integrity of the purchaser and of the seller stands 
out prominently as the foundation of credit. 

172. Forms of Credit. — One form is that of book 
accounts in which entries of purchases are made and 
for which payment is expected in due time, each party 
having confidence in the honesty of the other. 
Another form is that of loans, as when A has a surplus 
of wealth on hand in the form of money, which he 
is willing to entrust at a certain rate of interest to B; 
the latter wishing to employ it as capital in his busi- 
ness. This money thus borrowed on credit and used 
as capital is to be returned in kind, both principal 
and interest, unless provided for by some other 
arrangement. 

173. Credit Given Banks.— Another form of confi- 
dence that pervades the community is shown when 
persons, having money, which for the time being they 
do not require for personal use, deposit it in the bank. 
On the same principle of confidence or credit, the bank 
loans these aggregated sums to those who wish to 
utilize them as capital in various kinds of business. 
The depositor receives a certificate of his deposit in his 
bank-book, and he is at liberty, at any time, to draw 
out his money. 

Sometimes confidence leads persons to invest in 
stocks, it may be in an association for carrying on 
manufacturing, or for building and operating a railway, 
or for banking purposes, etc. The investor receives a 



176 POLITICAL ECONOMY. 

certificato of stock from the association, whatever it 
may be. Because of their confidence in the integrity 
and management of these associations or corporations, 
the people entrust to them their money, thinking to 
invest it safely and to good advantage. These certifi- 
cates are property, and are treated as such, since the 
owner can transfer them like any other class of property. 

174. Bonds. — Bonds, another form of credit, are 
often issued and sold by cities or corporations or States, 
and the money paid for them is really a loan to the 
parties issuing the bonds. They are received as 
property, and are an evidence of the credit given to the 
promises to pay, which at a certain time are to be ful- 
filled. Such bonds become articles of sale and ex- 
change to an extent that, dealing in them as property 
has become a regular and recognized form of trade. 
So long as confidence remains firm in the basis on 
which their financial value rests, they pass from hand 
to hand as merchantable property, but sometimes reck- 
less speculators — those pests of the financial world — 
render the market prices of these stocks unstable, 
though their basis may be undisturbed. 

175. Bank-Notes. — Another class of credits is that of 
bank-notes, issued on a basis that secures the confidence 
of the people, or of the government. These bills are 
used as currency but they are in the form of promis- 
sory notes, yet so great is the confidence in the ability 
and the willingness of the Government to pay, that 
they pass from hand to hand as freely as if they were 



CREDIT. Ill 

gold pieces of the same deuomination. They are known 
as paper money. Another important class of credit 
which prevails extensively in the community, we may 
characterize as private; this is in the form of promis- 
sory notes from individuals. The class of currency 
issued by the Government and popularly known as 
greenbacks from their color, simply base their credit 
on the promise to pay. In addition we have the notes 
of the National Banks, whose credit is based on govern- 
ment bonds owned by them, and held at the United 
States Treasury as security to meet these notes. (See 
p. 187.) 

176. The Basis of Credits. — Credit, to be trustworthy, 
must have a substantial foundation in real wealth 
upon which is based the confidence of the public. 
When we analyze business of every variety, we find 
that wealth, present or prospective, is the basis of 
credit. Though of itself alone, credit is not capital, 
yet it commands capital. 

177. The Utility of Credit.— Each one of a number 
of persons may have a little surplus in the form of 
savings or legacies, but they are themselves unable to 
use this wealth in such manner that it would yield 
an income, yet by means of a broker or a bank, they 
may loan this money on credit, and receive from it in- 
terest or dividends. The aggregated thousands thus 
loaned really belong to the lender, as they are secured 
by mortgage or otherwise, while the borrower has only 
its use. Tlie latter, by diligent and prudent manage- 



178 POLITICAL ECONOMY, 

ment, makes this borrowed capital pay interest as an 
income to the lender, and something more to himself, 
so that in time this surplus so accumulates, that he be- 
comes able to pay back the principal, and thus become 
the absolute owner. Thus through mutual confidence 
and judicious use of credit, both the lender and the 
borrower are benefited. 

178. — The advantages are almost innumerable that 
accrue to mercantile or industrial enterprises through 
the medium of credit properly based, for in such 
spheres it is most effective in utilizing the natural 
resources of the country. This system brings into 
active service the business or industrial talent of the 
community. How many men there are in society, who 
have fine business abilities, but for lack of capital that 
credit would bring within their reach are unable to 
exercise their talents, and thus indirectly benefit the 
people at large. Mark the contrast, when by means 
of capital thus borrowed their energies may be pru- 
dently exercised, while every business enterprise that 
is managed judiciously is widespread in its beneficial 
influence. From these illustrations it is clear that 
credit, under proper conditions, brings into active use 
much of the capital that lies hidden away by private 
individuals and, by so doing, benefits in numerous 
ways the whole community. 

179. Checks, Bills of Credit. — Every check that is 
drawn upon one bank by another, for the time being is 
only a bill of credit based upon funds deposited in the 



CBEDIT. 179 

bank thus drawn upon. This is the presumption in 
such business transactions^ not only in the frequent 
exchanges made within our own country, but the same 
principle extends to foreign lands. The whole com- 
mercial interests of the world would become stag- 
nant were it not for the active exercise of a judicious 
credit-system, that is based on wealth and the confi- 
dence of man in man. The facilities for these ex- 
changes of credit are greatly increased in large trade 
centres where clearing-houses have been established. 
These are a sort of central bank where the financial 
transactions of the city and vicinity for the day, are 
adjusted and balanced in a comparatively short time, 
perhaps not more than an hour. 

180. The Clearing-House. — The process is simple 
though apparently complex. A number of banks 
associate- together and establish a clearing-house. 
Each one of these has customers who deposit the 
checks which they have received from individuals, 
drawn, it may be, on the other banks belonging to the 
association. These individual checks are now the 
property of the bank in which they are deposited, but 
instead of sending a clerk to draw the money, the lat- 
ter takes to the clearing-house all the checks his bank 
may have on the other banks of the association. 
He hands them in, and the person whose duty it is, 
distributes them to the desks of the banks upon 
which they are drawn. But the latter have also 
checks drawn upon the other banks of the association; 
these are likewise distributed in the same manner. 



180 POLITICAL ECONOMY. 

The amounts called for by the various checks are 
made known and the balance is struck between them. 
This balance is paid in cash or by check on the debtor 
bank. 

This principle of balancing accounts is made to 
apply in effect between different cities, and likewise 
in foreign financial transactions. 

181. Credit May be Abused. — Though credit is not 
capital, yet as its representative, it is a purchasing 
power that performs its functions. For illustration: a 
merchant makes a purchase for which he is unwilling 
to pay cash down, but gives his note payable in say, 
three months; his credit being good that note is 
accepted by another merchant, and under the name of 
^^ mercantile paper " it passes from hand to hand until 
it finally comes back to the original giver and is hon- 
ored by being paid. This piece of mercantile paper in 
the course of its exchanges may have paid debts, made 
purchases, raised money and performed all tha func- 
tions of the ten-dollar note or gold piece we instanced, 
that started on its exchanges and the same day reached 
the bank again at the close of business hours. This 
successful piece of mercantile paper is assumed to have 
as its basis of credit real wealth, but in such cases 
there is always a liability of failure on the part of the 
merchant who issued the note to cash it when it 
becomes due. Numerous contingencies intervene, 
moneys due from customers may fail to come to hand, 
fires may consume his store and merchandise, similar 
reverses may render him unable to meet his obligation. 



CREDIT, 181 

and yet he had not designedly committed a fraud. It 
was his misfortune; but even then does there not lin- 
ger in the minds of his fellow merchants a doubt as to 
his prudence as a business man? 

182. — Credit is abused when given too freely. A 
ring, as it is called, of a few business men agree to 
eifdorse in turn for one another, and often to an 
extent that if even one were unfortunate the result 
miglit be the bankruptcy of the whole. Such action 
involves so many risks that it becomes a gross abuse 
and near akin to swindling. Wild and reckless specu- 
lations are sometimes entered upon by those who use 
borrowed capital only, which in truth does not belong 
to themselves but to those who loaned it to be used in 
legitimate business. There are numerous other ways 
in which credit is abused; as in living expensively 
instead of economically. Sometimes men of honor- 
able position in society have failed in this respect. To 
them may have been entrusted funds, belonging even 
to widows and orphans, to invest, of which they are to 
take such charge, that the principal, at least, should 
be safely kept, even if, occasionally, the interest or 
dividends may be diminished. But how often by the 
abuse of confidence these funds have been squandered 
by being used without authority in outside specula- 
tions ! 



XXIII. 

183-190. The present system of banking is the 
outgrowth of necessities in the commercial world. 
Banking had its origin in Italy during the Middle Ages, 
but in modern times it has been subjected to changes 
and improvements in order to adapt it to a commerce 
much more extended. The system of to-day may be 
justly characterized as a vast financial labor-saving 
machine, because, from the facil ties it affords, the labor 
of counting an(? transporting coin or bullion in mer- 
cantile transactions is almost dispensed with. Instead, 
the work is speedily and safely performed by using a 
few figures and penning a few words. In this process 
we see genuine credit — that based on wealth — system- 
atized to such an extent, that in the busy marts of 
trade, loans are obtained, collections made, debts paid, 
and all within a few hours. In order to facilitate 
these exchanges it is essential that the bank have on 
hand sufficient capital to meet all demands. When 
thus equipped it becomes a depository of money, which 
is credited to the several depositors, who by means of 
checks — bills of credit — can transfer to another any 
portion of their money thus held in trust. 



BANKING. 183 

184. Benefits Derived from Loans — Another advan- 
tage is that the aggregated amount of money in the 
bank can be utilized as capital by being loaned on 
good security to business men, and thus made to ad- 
vance the industrial interests of the people at large, 
thus giving opportunity for employment to those who 
wish it, and thereby promoting the interests of the 
business men or manufacturers, while the latter by their 
judicious enterprise are conferring benefits upon the 
whole community. The process of obtaining loans is 
quite simple. The individual who wishes to borrow 
goes to the bank — which is in truth a money market — 
and gives the required security for the return of the 
loan at the time designated ; and thus obtains the 
funds he desires to use in his business. The bank is 
remunerated for its part in the transaction by what is 
termed discount, which is paid in advance, and is 
another name for the interest that would accrue on the 
loan at the end of the time specified. In order to close 
the account, it is now only required to pay the original 
amount that was borrowed. 

185. Promissory Notes — One mode of obtaining 
money from the bank is that of selling its promissory 
notes. Suppose A has a note at hand from B for 
$10, 000 due in three months, but the former 
wishes to use the money at once, and he has it 
discounted at the bank. The bank accepting B's note 
with A^s endorsement or other security, really buys it 
and gives A the money, less the discount, and at the 
end of the three months collects the full face of the 



184 POLITICAL ECONOMY. 

note from B , and has for its profit the discount already 
paid. The money may not be handed to A at once, 
for he may not desire it in bulk, but he is at liberty 
to draw it out at pleasure, or he may transfer by 
check the amount or portions of it on the books to 
whom he will. 

186. Issue of Notes or Bills — Banks can, if they 
choose, issue their own notes on certain conditions 
that are imposed upon them by their charters. These 
issues are in the character of promissory notes payable 
on demand at the bank and as such, in ordinary business, 
pass from hand to hand, but if paid at the bank the 
latter can afterward issue them again, and have them 
pass as currency until they are worn out. They are 
accepted in trade at their face value, their credit 
being based on wealth in the vaults of the bank 
which they represent, and, as a convenience to the 
seller and the purchaser, they circulate in business, thus 
performing the functions of coin in their purchasing 
power. 

187. These notes thus used as currency are so much 
more convenient in business, that in practice they are 
preferred to the gold and silver which they represent. 
The aggregate amount of the notes should be propor- 
tionate to the amount of specie in the vaults of the 
bank. Laws in different States vary on the subject. 
Suppose a bank has $100,000 in coin or accept- 
able securities within its vaults, and it issues notes to 
the same amount, the holders of the notes would have 



BANKING. 185 

ample security. Firsts there is the equal amount of 
specie in the bank itself, and second, the obligations of 
those who originally borrowed its notes and put them 
in circulation. Sometimes, in order to protect more 
fully the holders of these notes, the law makes the 
stockholders liable to the amount of their individual 
stock. 

188. It is assumed that notes of the bank may be 
issued to an amount greater than the specie in their 
vaults ; such extra amount becomes clear gain to the 
bank. It is deemed that the risk is not very great of 
a simultaneous ran by all the holders of its notes upon 
the bank — that is, when they are presented and pay- 
ment demanded in specie — since such bills in the 
hands of the holders are scattered far and wide, and 
the owners would not likely present them in concert. 
Such contingencies have been provided for in respect to 
the redemption of the notes of the National Banks. 

189. The Savings-Banks — as the title intimates — 
were the outgrowth of a benevolent sentiment to aid 
people of limited means in acquiring the habit of sav- 
ing their surplus earnings, however small, by deposit- 
ing them in banks for savings. In order, as much as 
possible, to secure these moneys for the depositors, 
the banks loan them, usually securing them by mort- 
gages on real estate, that being deemed the most 
safe. Yet some other securities are also reckoned 
safe, such as United States bonds. These banks 
pay to depositors their interest semi-annually, but 



186 POLITICAL ECONOMY. 

at a rate which is not so high as that of other banks, 
since the compensation is in the safe-keeping of 
the funds. 

190. Commercial Banks.— Another class of banks is 
known as commercial. They rely for funds, usually, 
on temporary deposits by men engaged largely in 
business. Their moneys are loaned for a short time 
only; such as for thirty, sixty or ninety days, and on 
personal security. The interest — that is, discount — is 
reckoned by the day also, and paid in advance. The 
business of these banks is so conducted by checks, 
that the system is simply that of credit — coin being 
scarcely ever transferred in the transactions. 



XXIV. 

NATIONAL BANKS. 

191-194. State Banking. — Previous to the establish- 
ment of the present National banking system on Janu- 
ary 1, 1863, the separate States were accustomed to give 
charters for banks, which policy they can yet exer- 
cise, but under certain conditions. The charters for 
state banks in former times were often loosely drawn, of 
which feature dishonest men took advantage and thus 
defrauded the community. These state banks would 
frequently commence business ostensibly on the 
amount of capital named in their charter, but which 
was in truth specious, since scarcely any coin was placed 
in their vaults, but instead oftentimes the stockholders 
would merely give their personal notes for the amount 
they subscribed. Even if these stockholders intended 
to do right by the depositors, it was a very unreliable 
basis upon which banks should issue their notes, 
though they often did, and circulated them far and 
wide, and to an amount much greater, sometimes, than 
the capital named in their charter. 

At length these notes came back to be redeemed, but 
they found but little coin in the vault of the bank, 
In consequence, by due process of law the bank was 
declared bankrupt and the holders of its bills lost the 



188 POLITICAL ECONOMY. 

amount they called for and without redress. One 
instance is on record of a bank that had its bills to the 
amount of more than 1500,000 circulating in the com- 
munity, while to redeem them it had in its vaults only 
186.46 in, specie. 

There were, of course, exceptions to such wholesale 
villainies, but the entire system needed reforming. 
Even if the bank had a capital paid in, it was a risk to 
issue notes to an amount more than the capital, as 
was the custom, since if they should be returned in 
great numbers the bank would fail. 

192. Efforts to Remedy the Evil. — Many measures — 

which we need not detail — were introduced into the 
legislation of the several States to remedy these evils, 
but they were only partially successful. Before the 
National banks came into existence the notes of the 
best managed state banks circulated at par only within 
their own boundaries or to some extent along the respec- 
tive State lines where their character was known, but 
further off they were held at a discount, more or less, 
or did not circulate at all. Under such conditions 
there could be no National banking system, gold and 
silver being the only medium of exchange that was 
accepted throughout the Union. So great were these 
discounts that they amounted annually to many million 
dollars, an enormous burden on the business of the 
entire Union, while at the same time they enhanced 
the price of every article bought and sold. 

193. The Financial Basis. — Belief came when the Na- 



NATIONAL BANKS. 189 

tioiial banking system was established. The financial 
basis of this class of bank-notes was at once recog- 
nized as substantial throughout the Nation. In con- 
sequence, from the hour of their issue they were given 
and taken at par everywhere, and business was relieved 
of the burden of the enormous discounts; such an era 
of good money had never been known in the land and 
we have had no bad money since. The system is so 
arranged under a general National law, that there 
can be free-banking but no monopoly, as every district 
or neighborhood in the land can have a National bank 
if the people want it, and take the proper measures. 
If five persons think proper, they can join in a corpora- 
ation, comply with the conditions, and establish a 
bank; they can carry it on, and, if it does not pay, they 
can wind it up, call in the notes they have issued, and 
withdraw their pledged bonds lying in the United 
States treasury, and no one holding their notes can 
possibly lose a dollar. There is no distinction in the 
value of the bills issued ; the National Government 
equally guarantees the notes of a bank with 150,000 
capital as it does those with $10,000,000. 

194. Capital Obtained, How? — These banks are re- 
quired by their charters (1863) to purchase for their 
full capital the requisite amount of United States 
bonds, all of which must be paid in before they can go 
into operation. On these bonds the Government 
pays the bank the regular interest, but it retains the 
bonds themselves on deposit at the treasury for the 
purpose of redeeming the notes, if necessary, that the 



190 POLITICAL ECONOMY. 

bank may issue. In addition, the United States treas- 
ury stands guard, that these banks shall not over-issue, 
for the law permits only nine-tenths of the capital 
to be issued in the form of notes — that is, if the capital 
is 1100,000 the issue in notes can be only 190,000. 
Still further in order to prevent fraud by over-issue the 
treasury department itself prints and issues these 
notes in due form, and keeps an account of such sum 
with each bank, in order, the more surely, to secure the 
holders of the notes in case of the failure or winding 
up of the bank. No person has ever lost a dollar by 
taking in payment a note of a National bank. 

To make the system uniform throughout the Union 
every National bank is enjoined to accept under all cir- 
cumstances, the notes of any other National bank, no 
matter where located, because their full value is se- 
cured at the Treasury in Washington. It is consistent 
that a free and safe National banking system should 
be coterminous with the system of free-trade that ob- 
tains among the individual States of the Union. 



XXV. 

FEEE-TRADE AKD PROTECTION. 

195-213. It falls clearly within the province of polit- 
ical economy to treat of these two systems— so in 
marked contrast with one another. There are numer- 
ous reasons, among which is our continuous progress 
in mechanical industries, that, make a full and im- 
partial discussion of this important subject appropriate 
in a political economy designed for American youth. 
We will endeavor to give a summary of the reasons in 
behalf of each theory as set forth by its respective 
friends.- The pupil will obtain a clearer view of these 
two economical theories in their relation to our own 
country if he carefully bear in mind the peculiarity of 
our two governments — the National and the State 
— and of the two modes of obtaining funds for defray- 
ing their respective expenses. As already noted (p. 81) 
the National government derives its means of support, 
under ordinary circumstances, from duties levied upon 
foreign property that is brought into the country for 
sale, w^iile the State obtains its funds from taxes levied 
upon domestic property. These sources of revenue are 
separate and distinct. 

On the adoption of the Constitution of the United 
States, the people delegated to the National govern- 



192 POLITICAL ECONOMY. 

ment the power to guard and regulate all their 
interests that pertained to foreign nations. The man- 
agement of these foreign affairs included treaties on the 
subjects thus involved, and among these was that of the 
regulation of commerce. The latter item includes the 
right to impose tariffs or duties upon foreign merchan- 
dise brought into our ports for sale. 

196. Taxes Adjusted. — The Fathers of our Consti- 
tution^ in their far-sighted wisdom, enacted laws by 

/which the National government was to be supported by 
a system of indirect taxes ; that is, duties imposed upon 
imported foreign property, while at the same time they 
showed equal wisdom in having the State governments 
to be supported by direct taxes, which they themselves 
were to levy upon domestic property^ such as real- 
estate, etc. 

The direct tax is levied on the property at a rate to 
secure the required amount, and it is collected by 
means of a tax-collector, who, if necessary, can call the 
law to his aid in order to enforce payment; while in 
contrast, the payment of the indirect tax is voluntary on 
the part of the payer, as he need not purchase the im- 
ported article thus taxed, unless he wishes. 

197. The Terms Defined. — The discussion in respect 
to free-trade and protection, however modified, comes 
within the range of political economy, and it will 
always be a question of peculiar interest to the Ameri- 
can people, because of their supporting two separate 
governments, by means of funds derived from two inde- 



FBEE-TRADE AND PROTECTION. 193 

pendent sources. The interest in the tariff and its 
rate of imposts will continue^ because of the numerous 
changes produced in the progress of American mechan- 
ical industries^ since the products of the latter in 
respect to their market value must be influenced 
by the competition of the foreign manufacturer. 

Free-trade is defined, as ''^ Commerce unrestricted 
by tariff regulations or customs duties ; " and Pro- 
tection represents the principle, " that in order to 
promote home industy a duty should be levied on 
those articles made abroad, that are similar to those 
made at home." 

In this connection may be mentioned another theory 
or system of imposing import duties, known as ^^for 
revenue only" — which will be noticed further on. 

198. The pupil will bear in mind that if we adopt 
free-trade^ pure and simple, both our governments — 
National and State — will have to be supported by direct 
taxation in some form on domestic property of various 
kinds, such as real-estate, incomes, etc., while the for- 
eign property imported for sale, amounting annually 
to an average say of nearly 1900,000,000, would not pay 
one cent toward the support of either government. It 
is not in accordance with reason nor justice that one 
class of property should be exempt from paying its 
proportion of the expenses of the government, and 
especially that class which in the course of business 
pays so much higher percentage of profit than does 
real-estate ; moreover the greater amount of the benefits 
would accrue to the foreign manufacturer and importer. 



194 POLITICAL ECONOMY. 

199. Competition Regulated. — The United States 
government or Congress can legislate in such manner 
as to make competition practicable among the Amer- 
icans themselves as promoters of their own industries. 
When free-trade prevails competition is thereby made 
directly between our own manufacturers and those 
abroad, with the advantage of less cost of production in 
favor of the foreigner, because of the comparatively low 
interest, and the low wages he pays. The underlying 
principle as to the price put upon manufactured arti- 
cles is, that it be graduated by the cost of production^ 
This general principle, being based on justice and com- 
mon-sense, has been observed universally in every coun- 
try. The European manufacturer applies this rule in 
putting the price upon the articles he makes ; the same 
principle and practice govern the American. The one 
independently of the other, regulates the price of his 
own product, when he puts it on the market, and 
always in proportion to the cost of its production. In 
consequence of less wages being paid, the European 
price can be placed lower than the American. In view 
of this fact, fairness to the latter would demand that 
the rate of a tariff should be adjusted in accordance 
with the cost of producing the manufactured domestic 
article. 

200. Why should not the American manufacturer 
avail himself of this universal principle in deciding at 
what price he will sell his own production ? If he pays 
fifty per cent, more wages to his workpeople than the 
foreigner, he will, without reference to the latter, grad- 



FBEE-TRAJDE AND PROTECTION. 195 

uate the price in accordance with that extra cost. 
Should he thus act justly toward himself and his em- 
ployes, he might be confronted, if under free-trade, 
with similar English articles fifty per cent, cheaper than 
he can afford to make and sell his own, since the Eng- 
lish manufacturer pays, on an average, in wages forty- 
eight cents, where the American pays one dollar. 

201. The National government now interferes and 
applies its rule of taxing foreign property, imported for 
sale, in order to obtain its requisite revenue. To levy 
this impost is a right claimed and granted one to 
another by all the nations of Christendom. That 
right being granted, it is a matter of policy with any 
one nation itself, what shall be the rate of duty im- 
posed. It is difficult for Congress to adjust the tariff 
so as to secure the needed revenue, and at the same 
time admit the foreigner on our own soil to sell his 
merchandise on equal terms with our own people. It 
would seem fair to impose a duty equal to the differ- 
ence in the cost of production, and as the wages paid 
in manufacturing are by far the greatest expense in- 
curred they might be taken as a basis for a fair adjust- 
ment of a protective tariff, especially since the average 
rates of wages in Europe and the United States appear 
from statistics to be more definitely known than other 
items of expense. 

202. Owing to numerous contingencies, it would 
seem impossible that an American tariff could be so 
framed as to be absolutely perfect in respect to the 



196 POLITICAL ECONOMY. 

principle of protection, and at the same time, admit 
for sale the exact amount of foreign merchandise that 
would produce precisely the needed revenue. In conse- 
quence of the continual progress in the mechanical 
industries of the United States, and, also, of changes in 
the modes of manufacturing in Europe, it becomes nec- 
essary from time to time, to revise the tariff in order 
to adapt it more perfectly to the current circum- 
stances. 

It may be remarked, that even when the average 
rates of wages paid abroad are known, the National gov- 
ernment imposes on the imported article a tariff, the 
percentage of which is quite below that average : — For 
illustration; at the present time on silk fabrics the aver- 
age tariff is 50 per cent, but were it imposed in accord- 
ance with the average wages paid the operatives in the 
silk factories scattered over Europe, it would be 67 per 
cent. — that is, the American silk manufacturer pays in 
wages one dollar, where the European pays on an aver- 
age thirty-three cents. 

203. Fair Competitions, — The foreign article after 
halving been taxed, say the amount of the difference in 
the cost of production, meets the domestic article on 
equal terms in the markets of the United States, while 
the duty — as an indirect tax — goes into the Natioiuil 
treasury. Both parties are free to sell their merchan- 
dise at whatever percentage of profit they choose, Avhile 
within our own territory is afforded a fair and open 
competition between the foreign and the domestic 
manufacturer. 



FREE-TRADE AND PROTECTION. 197 

204. The Extension of Division of Labor. — The advo- 
cates of free-trade argue that if the principle of division 
of labor, which has done so much for the promotion of 
mechanical industries in -individual countries, were 
fully carried out between the nations themselves, it 
would be better for the comfort and success of man- 
kind. They also claim that such international ex- 
clianges should not be interfered with by the govern- 
ment, as when such property brought in for exchange 
or sale is taxed; and they likewise argue, that by means 
of free-trade some kinds of merchandise can be 
obtained abroad with less expense tlian if they were 
produced at home. There are, it is true, a limited 
number of instances in which such results are attaina- 
ble, owing to certain conditions of climate and low 
wages, or special facilities of labor, as in the production 
of raw silk, or tea, coffee, chocolate, spices, rubber, 
etc. The latter articles, however, constitute not one- 
hundredth part of those commodities that are essential 
to promote the comfort of the American people. But 
these extreme cases have no special or practical bearing 
on the infinitely more important issue, which relates 
to the almost unlimited number of useful and necessary 
commodities that are furnished at home, but which com- 
pete with similar foreign-made articles. The latter, 
the American people can manufacture for themselves, 
especially, when they have within their own territory the 
varied forms of natural resources affording the raw ma- 
terial in virtually inexhaustible abundance. England 
has within her own boundaries coal and iron- ore ; why 
should she not make her own iron? and who has a right 



198 POLITICAL ECONOMY. 

to complain if she does ? The same may be said of the 
United States ; and tbe same general principle applies 
to any other mechanical industry for which they have 
the raw material within their own territory. 

205. Universal Free-trade not Adapted to the United 
States. — Free-trade with other nations might be adapted 
to France or England, as the expenses of their single 
governments would then be paid from the same fund 
— a direct tax levied on the domestic property of the 
people. Protectionists argue that free-trade with the 
outside world would not suit the present arrangement 
of the American people in supporting two separate gov- 
ernments with funds derived from two independent 
sources. And we add that except when their patriot- 
ism intervenes, they have always chafed under the ex- 
actions of a direct tax levied upon domestic property 
by the National government, while there are no com- 
plaints about the indirect tax from those who purchase 
in a thousand forms, high-priced foreign merchandise, 
such as the luxuries of art, expensive wines or costly 
textile fabrics for wear, or, it may be, merely for osten- 
tation. The tendency of the free-trade theory is to 
extol the assumed benefits derived from international 
commerce in comparison with those of a home trade. 
(See p. 124). Let it be borne in mind, that, when our 
manufacturers and agriculturists have supplied the 
ordinary wants of 65,000,000 people, they can send 
abroad their surplus — thus far found sufficient for the 
purpose — in exchange for those commodities which 
they themselves cannot produce. This limit of inter- 



FREE-TRADE AND PROTECTION. 199 

national trade is in accordance with the aphorism 
^^ charity begins at home " — the policy of the American 
people being to be just to themselves and generous to 
outsiders. 

206. The Non-Judicious Policy. — Protectionists 
argue that it would be poor economy for the American 
people to waive their right of imposing a tariff on for- 
eign property brought in for sale, and thus, on that 
basis, invite competition on their own soil with Euro- 
pean manufacturers. Much less could they compete 
successfully with the latter in their own land, since 
in Europe, owing to an overcrowded population, there 
would always be a superabundance of workpeople to 
compete among themselves, and thus bring wages 
down to the lowest point. Under such conditions, 
there could be no genuine commercial reciprocity, for 
in such a market, Americans, when paying fair wages, 
could have no inducement to participate. On the 
other hand, the latter have their wheat and flour, 
Indian corn, beef and other provisions, with their to- 
bacco, cotton and petroleum to send to Europe in 
exchange for the high-priced articles or luxuries which 
they may desire, and that without encountering a 
ruinous competition. 

207. Free-trade Discriminates in Favor of Foreign Prop- 
erty. — Free-trade contends, that any tax imposed by 
one country upon property brought in from another 
for sale, trammels free exchange, and interferes with 
the freedom of the owner to do as he pleases with his 



200 POLITICAL ECONOMY. 

own. Such laws free-traders deem restriction, since 
they interfere with the right of exchanging property, 
and they even sometimes characterize such restriction 
as a species of oppression or of rohbery. They seem to 
attach a sacred ness to imported foreign property, 
which they virtually deny the property belonging to 
the American people, inasmuch as the latter must be 
directly taxed to defray the necessary expenses of the 
two governments, while in relation to foreign property 
they would dispense with the import duty altogether. 
The land of the farmer is thus the more highly taxed, 
and he pays it out of the produce of his fields ; the 
mechanic pays his in increased rents, and the mer- 
chant, also, bears his share of the expense. Free-trade 
objects to a tax, which, in the form of a tariff, is im- 
posed upon foreign property before it is admitted to 
this free exchange within the territory of the Union. 
The question arises. Why should not a case of foreign 
silks be taxed to supply funds for the National govern- 
ment, as well as an acre of land or a town lot? The 
free exchange among the people themselves, of the 
products of their own labor, stimulates their industrial 
and social life, nor does the presence in their markets 
of competing foreign commodities hinder this prog- 
ress, when the latter have been taxed indirectly for 
the public benefit. Under these circumstances the im- 
pulse in each person is encouraged to follow that kind 
of labor in which he or she can be the most successful. 
Meanwhile in consequence of this stimulus, there grad- 
ually comes into existence a system of diversified in- 
dustries. 



FREE-TRADE AND PROTECTION. 201 

208. Self-interest Governs Commerce. — The advocates 
of free-trade also urge that free commercial inter- 
course — that is^ ill untaxed property — between the 
nations establishes good-will and mutual friendship ; 
yet the nations in such intercourse are all more or 
less influenced by self-interest. One finds it for her 
interest to admit certain articles free of duty, as for 
instance, raw material, which she cannot produce her- 
self, for the promotion of her manufacturing industries, 
or provisions to supply her operatives with food, as Eng- 
land admits grain free of duty. She does this as a mat- 
ter of pure self-interest, and not for the benefit of the 
nation that produces the food required, nor to promote 
mutual relations of good-will, though no doubt, such in- 
tercourse does engender a sort of mercantile and kindly 
interest that is reciprocal. England does not admit 
tobacco from the United States, nor wines from 
France, free of duty. She decides for herself what to 
tax and what not, and no one gainsays her right to do 
so. The American people claim the same right to tax, 
or not, foreign property brought in for sale. The 
theory of perfect free-trade between the nations of the 
earth has never yet been carried out. Every nation 
admits free of duty any merchandise that she greatly 
needs and would be benefited more by its coming in free, 
than if it were in the least restricted by being taxed. 
There has never been in the history of the world as 
much kindly feeling in the main, between the nations, 
as there is to-day, and every one of them, while admit- 
ting some article free for its own special benefit, taxes 
more or less other property that is imported for sale. 



202 POLITICAL ECONOMY. 

209. The Philanthropic Theory. — A philanthropic or 
humanitarian view of free international commerce is 
sometimes presented by the advocates of free-trade. 
They assume that by means of such intercourse — un- 
trammeled by import duties — a kindness of feeling is 
greatly promoted between commercial nations, and 
they impliedly, at least, censure the American people, 
because they impose a tariff upon certain classes of for- 
eign property brought in for sale. This implied 
charge of not encouraging a humanitarian sentiment 
among the nations is disproved by the fact that the 
American people, beyond compare, are the most gener- 
ous on earth. During the one hundred years (since 
March 4, 1789,) they have been a nation, they have 
welcomed the many millions who have fled from the in- 
dustrial and caste oppressions of Europe ; have made 
them participants of their own political privileges ; 
have educated their children equally with those of the 
native-born, thus preparing them to become genuine 
Americans, that they may enjoy, equally with them- 
selves, the blessings of their own goodly heritage. 
Still more, since January 1, 1863, they have given, 
under the same conditions, to those foreign-born citi- 
zens — real or prospective — who so desire, equally with 
the native-born, one hundred and sixty acres of the 
unoccupied public lands as homesteads, and also, have 
taken appropriate measures to make these homes ac- 
cessible by means of railways. 

Notwithstanding this generosity, free-trade twits 
the Americans because they are true to themselves, 
and are unwilling to admit free of duty foreign manu- 



FREE TRADE AND PROTECTION. 203 

factiired property, that would compete unfairly with 
the productions of their own manufacturers and work- 
people. 

210. Historical Statements. — If American youth de- 
sire to understand this important economical question 
of free- trade versus protection, one that has naturally 
entered so often into political discussions, they would 
do well to take a glance at its history. As a financial 
matter, it was almost the first question that con- 
fronted our First Congress in 1789. Previous to the 
war of the Revolution, England had persistently 
labored to hamper the native mechanical industries of 
the American colonists. In numerous instances she 
prohibited some forms of industry absolutely, and 
crushed others that dared assert themselves. So prev- 
alent was this spirit in English governmental councils, 
that even William Pitt — the special friend of the colo- 
nists — said if he had his will, they should be per- 
mitted to manufacture ^'^not even a hob-nail.''^ The 
meaning of that declaration was, that every article the 
colonists needed should be made in England. During 
the contest of the Revolution, however, necessity 
brought into existence numerous mechanical indus- 
tries, many of which were temporary, as they per- 
tained more specially to the implements of war for the 
defense of the country. The moment our independ- 
ence was acknowledged and peace concluded, English 
merchants and manufacturers, under the auspices of 
free-trade, flooded the markets of the United States 
with their goods, and at a rate so low that '' in four 



204 POLITICAL ECONOMY. 

years England swept from the country every dollar 
and piece of gold." 

211. Wise Statesmanship.. — The American statesmen 
of that period, because of their superior political wis- 
dom, had already elicited the admiration of the tliink- 
ing minds of Europe. Meanwhile the mechanical 
industries of the youthful nation were in a most de- 
plorable condition. In respect to them, these states- 
men had not yet the opportunity to legislate. Such 
had been the state of affairs, that the leading men 
among the colonists had been virtually debarred that 
right by the then Home government. In addition, the 
American people had now for the most part, to learn 
to manufacture their own useful articles, which had 
hitherto been supplied from abroad, principally from 
England. The First Congress took in the situation 
and enacted a tariff (1790) to obtain revenue for the 
support of the National government, and indirectly aid 
the industries of the people. This law was signed by 
George Washington as President. The preamble sets 
forth the design to be: ''For the support of the (Na- 
-tional) government, and for the encouragement and 
protection of domestic manufactures." In consequence 
of this law the people were induced to commence mak- 
ing the most essential articles for themselves, and it was 
only by means of energy and perseverance they were 
able to succeed. Their great rival, England, had had 
the experience of centuries in such manufacturing, 
and still wielded her unequaled facilities with con- 
summate skill and energy. 



FREE-TEADE AND PROTECTION. 205 

212. Judicious and Protective Legislation. — Let the 
pupil bear .in mind that the duty levied on foreign 
property brought in for sale is essential in this indi- 
rect manner to secure the proper amount of revenue to 
support the National government. The result has 
proved the utility of this policy, since for illustration, 
with only five exceptions within the last twenty-five 
years — which small deficiencies were made up by the 
surplus on hand — it is found by deducting the ex- 
penses incident to the Civil War, such as the interest 
on the National debt, pensions, etc., that the import 
duties fully paid the current expenses of the National 
government. These include, as for example in 1891, 
the expenses of Congress, of diplomatic services 
abroad of every class, of the war and navy depart- 
ments, and the annual deficiency of the post-office 
department, the support of the Indians, and other 
civil and- miscellaneous items. In connection with 
this right to levy a duty on such property. Congress 
must exercise judgment in respect to the rate imposed, 
and so grade the tax as to secure a fair competition in 
our own markets between the foreign made article and 
a similar one of domestic manufacture. If our tariff 
is so high that it does not pay the foreign manufac- 
turer to export his commodities to us, the result will 
be that none will be imported, and in consequence, no 
revenue will be received. On the other hand, when 
the tariff is so low, that the foreign article comes in 
cheaper than the domestic, since, because of his 
greater expenses, the American manufacturer cannot 
afford to produce it, and he withdraws from the con- 



206 POLITICAL ECONOMY. 

test^ then the revenue may be increased in proportion, 
but it will be at the expense of our own workpeople, 
who are thrown out of that special employment. Ju- 
dicious and protective legislation strives to reach the 
golden medium in such manner, that the foreign arti- 
cle may meet the domestic in our own markets in an 
open and fair competition. By this means both ends 
are attained; the revenue is sufficient, while employ- 
ment is given to the American workpeople, and the 
foreign manufacturer or merchant also derives a fair 
profit from his commodities thus brought in for sale. 

213. Theory Versus Practice. — The advocates of 
free-trade proclaim ideas on political economy that 
partake more, it would seem, of the theoretical than 
the practical. This is an inference from the fact that 
no nation has ever acted on the principle of absolute free- 
trade as a permanent policy, while all practice, more or 
less, the custom of taxing foreign property brought 
into their borders for sale, especially, when it competes 
with their own manufactures. In some instances 
there may be exceptions, as when their own facilities 
for making similar articles are so superior, that they 
can defy foreign competition. Such is the case in 
some respects with England. No matter how small 
the amount of duty imposed, to that extent, it is a 
protection for those within the limits of the State, 
who are engaged in making similar articles. Nations 
sometimes tax commodities for the revenue alone, 
when such articles cannot be produced within their 
own territories. 



XXVI. 

FREE-TRADE AND PROTECTION — CONTINUED. 

214-238. The Two Aphorisms. — Free-trade has a 
favorite aphorism ; " Buy where you can buy cheapest, 
and sell where you can sell dearest/' Honorable and 
prudent men are more anxious to have the means of 
paying, than the opportunity of buying. Hence hon- 
est protectionists express their sentiments on the sub- 
ject in the aphorism: '^Buy where you can pay easiest." 
This motto is specially applicable to those who earn 
their living by working for wages. Statistics show 
that three-fourths of the adults, if not more, within the 
United States are of this number. As a general rule, 
in order to make practical this aphorism, the theory of 
the protectionists is to keep up the wages of those 
who, as employes, are engaged in classes of manufact- 
ure with which the foreign article comes in competition, 
and this can be done as a rule by imposing a tariff 
equal to the difference in the wages paid, or the cost 
of production. It is consistent with this theory of 
equalization, that, in legislating for the whole people, 
the welfare of the majority — those who work for 
wages — should be as well guarded as the interests of 
the minority, who furnish the capital. 



208 POLITICAL ECONOMY. 

215. Eigh Wages or Low. — It is plain that to have 
higher wages and pay higher for the necessaries of life 
is much better than to have lower wages and pay cor- 
respondingly low for such commodities. Every think- 
ing workman prefers to have higher wages and pay 
correspondingly high for their comforts^ because in 
that case they can economize to greater advantage than 
if they had lower wages and were thus limited in their 
outlay — living perhaps from hand to mouth. In addi- 
tion it is assumed that the wage-earner, if misfortune 
does not intervene, will have a surplus at the end of 
the year, if he is industrious, economical and temper- 
ate, and that such surplus will be in proportion to the 
wages he receives. 

216. The protectionists, in proof of the advantage 
of receiving higher wages and, according to the theory, 
paying higher for the comforts of life, cite the well- 
known fact that those who work for wages in the 
United States have far more in proportion deposited 
in savings-banks than any other wage-earners in the 
world. This state of affairs the friends of protection 
wish to perpetuate by taxing for the benefit of the 
National government foreign property brought in for 
sale that competes with our own manufactures. They 
wish, also, to make that competition generous, fair 
and equal; to avoid monopoly on the one hand and 
secure the required revenue on the other. To accom- 
plish this end perfectly is scarcely possible, since legis- 
latij^, however judicious, can only approximate such 
perfection, because of the numerous influences that 



FBEE-TRADE AND PROTECTION— CONTINUED. 209 

often change the relative conditions of the home pro- 
duction as compared with the foreign. This dis- 
turbing element may be in an increase of cheaper raw 
material or the reverse, or in improvements of machin- 
ery or in enlarged facilities for reaching a market. 
Under such or similar circumstances, it becomes 
necessary sometimes to revise or readjust the schedule 
of the tariff; this should be done in such way as not 
to work injustice to the wage-earners nor to those who 
furnish the capital. Under such conditions home 
competition results in giving employment to the work- 
people and also in lowering to a just and reasonable 
price the articles produced. 

217. Successful Industries Mutually Beneficial. — 

Thinking American wage-earners recognize that nearly 
all the necessaries of life which they purchase for their 
families, such as house-room, food and clothing, are 
furnished by their own neighbors and countrymen. 
They require and use very little outside of what is 
thus produced; perhaps not one dollar in thirty or 
fifty of their earnings is expended in purchasing 
foreign-made articles. They, for instance, buy tea and 
coffee, which are foreign products, but the duty was 
removed from both these in 1872 and from chocolate 
and the spices of the tropics. Thus it is seen that the 
American wage-earners of to-day, when supplying their 
ordinary wants, exchange with one another their 
respective products. American workpeople, as indi- 
viduals, need and use comparatively little of what^iey 
themselves make, but owing to the diversities of in3us- 



210 POLITICAL ECONOMY. 

tries they supply one another by exchanging with 
their own countrymen their respective products. The 
farmer of the Northwest exchanges his wheat or flour 
for the manufactured goods of the East. This exten- 
sive free and untrammeled interchange constitutes the 
American home market — the most extensive and per- 
fect in the world. It follows, that it is for the advan- 
tage of those employed in mechanical industries, that 
these should be diversified, and that all should be suc- 
cessful. Protectionists instance the well-established 
result that if one industry is discontinued, its work- 
people, being thus thrown out of employment, cannot 
afford to be idle, and they immediately seek work in 
other industries which become crowded with opera- 
tives, and this unusual competition lowers the wages of 
all concerned. The sum of the matter is, that suc- 
cessful and useful industries sustain one another; they 
give employment to wage-earners who easily supply 
their wants and at reasonable rates on the principle of 
the common, but humane proverb, *Mive and let live." 
Home competition by means of this free exchange of 
commodities within our own land creates a home 
market that is of untold importance to all the Amer- 
ican people. 

218. In this connection the aphorism, ^'^Buy where 
you can pay easiest," seems to be peculiarly applicable 
to those Americans who work for wages. The only 
commodity they have for sale or exchange for what 
they wish is their own labor, and this they must sell 
where they themselves are present and employed. If a 



FBEE-TEABE AND PROTECTION— CONTINUED. 211 

working-man hires a house for his family, and con- 
tracts to pay its rent by his labor, for that reason it is 
cheaper for him, because he pays it easily. This prin- 
ciple holds true in relation to almost all the supplies 
he may need for his family. 

219. Workpeople Aifected by Free-trade. — It is ad- 
mitted by free-trade advocates that, "If our protective 
duties were removed, wages might decline in full pro- 
portion," but then it is added, "We should get cer- 
tain articles all the cheaper.^' Protectionists, on the 
other hand, deem this statement partial and incom- 
plete, since the removal of the duties just mentioned 
in making certain articles cheaper would be counter- 
balanced in the consequent diminution in the wages of 
the workpeople — the very classleast able to bear the bur- 
den. They add further, that in the case of the Amer- 
ican people adopting free-trade, as no duties would be 
collected from imported foreign property, the amount 
of revenue thus formerly produced could be obtained 
from other resources, and distributed by means of a 
direct tax levied for the purpose upon incomes, real 
estate, domestic manufactures, etc. In the latter two 
instances the workpeople would first be indirectly 
reached in the enhancement of their rent, and second in 
the diminution of their wages. Their employers would 
be compelled to resort to a distribution of the new bur- 
den thus imposed, and their most available resource 
would be in causing labor to share the extra expense of 
the new tax by reducing the wages of their employes. 
The diminution of wages would far exceed in amount 



212 POLITICAL ECONOMY. 

what they would save by the cheapness of the imported 
foreign-made articles. There is no alternative; if the 
expenses of both governments are to be borne by direct 
taxation, it is only fair that workpeople should bear, 
though indirectly, their proportion, since they are 
equally protected by the government in their rights 
and property. The latter is now exempted, for the 
most part, from direct taxation, because of the usual 
limitations afforded the poor man in respect to the 
amount of his property that is subject to be taxed. 

220. Another feature of the case is that the tariff, 
in producing funds to defray the expenses of the 
National government, aids the workpeople by reliev- 
ing them of the contingency, as we have seen, of being 
indirectly taxed for the same purpose by the diminu- 
tion of their wages, and the increase in their rent. In 
addition, the tariff is a great boon to them as it opens 
the way for their employment in mechanical industries. 
In truth, upon the whole it appears, that in proportion 
to the interests involved, none are so much benefited 
by what is termed a protective tariff as the workpeople 
themselves. 

221. Fair Competition. — Protectionists profess to 
desire a competition that would be fair, not merely 
among American manufacturers themselves, but like- 
wise between the latter and the foreigners whom they 
have admitted as competitors. In this they are con- 
sistent with their theory of competition, which is 
designed to give employment to their own workpeople, 



FREE-TRADE AND PROTECTION— CONTINUED. 213 

but at the same time admit competing foreign com- 
modities to an extent that will produce sufficient rev- 
enue to support the National government. This policy 
is evidenced by their never having designedly framed 
a tariff so as to exclude foreign, property, though they 
deem its presence in our markets of secondary impor- 
tance to the promotion of the people's own industries. 
This theory and practice preclude monopolies on the 
part of either foreign or domestic manufacturers, since 
the way is open to both parties to engage in such 
industries. 

222. International Free-trade hot Available. — The 

ardent advocates of free-trade prophesy great blessings 
to the human family, if all their commercial and 
industrial interests were under the benign influence of 
that system, and that mutual good-will would thus be 
promoted among the nations. The protectionists, on 
the other hand, are not inclined to accept a theory, 
which implies that the inhabitants even of Christen- 
dom are prepared for the adoption of a system so uni- 
versal. Their reasons are based on the industrial and 
social inequalities that are so numerous among the 
nations of Europe — these we need not enumerate. 
The advocates of protection wish to secure these pre- 
dicted blessings for that portion of the race, whose con- 
ditions are such as to warrant a successful application 
of this phase of the free-trade theory. They look upon 
the United States with their population of 65,000,000, 
as the most available among the nations of Christen- 
dom, to be brought under the benign influence of a 



214 POLITICAL ECONOMY. 

mutual good- will among themselves, growing out of a 
unity of national interests ; meanwhile, they propose 
to continue and greatly extend commercial intercourse 
with the outside world. 

223. The Adaptation for Home Free-trade. — The 

Americans are peculiarly adapted for so grand an exper- 
iment. They have a territory nearly as large as all 
Europe, but owing to the zone it occupies it has a 
much greater amount of land that is available for agri- 
cultural and pasturable purposes. No people so numer- 
ous have in one compact and extensive territory such 
diversity of temperate climate and productions of the 
soil — from the northern portion with its cereals and 
orchard fruits to the southern with its semi-tropical 
fruits, its cotton, tobacco, and its sugar. Then again, 
the central portion of this compact territory is drained 
by navigable rivers, the Mississippi and its tributaries, 
running, in the main, from the north toward the south, 
all admirable for inland communication and the pro- 
motion of interior commerce, and in addition, easily 
supplemented by railways running in every required 
direction. To these advantages may be added the un- 
told wealth of its diversified mineral resources. 

224. Elements of Harmony. — The protectionists take 
into consideration the number of the population in the 
Union and its rapid increase from year to year; the 
unequalled progressive and practical character of the 
people; their industries and the vast natural resources 
they have at hand to utilize ; their common schools. 



FREE-TRADE AND PROTECTION— CONTINUED. 215 

moulding the children of all classes into one compact 
and patriotic nation, and all under a government that 
is known only by its blessings. In connection with 
these are combined other elements of harmony, such 
as political equality, liberty, civil and religious; the 
public schools, in which all the youth are taught the 
English language. To unite the American people still 
more in sympathy, a continual intercourse of multi- 
tudes is going on from one portion of the Union to 
another, for various reasons; some for business pur- 
poses, others for recreation or in search of health, 
while large numbers from different motives migrate 
from one section to take up their permanent abode in 
another. These are some of the reasons why protec- 
tionists labor to secure a home market and free- trade 
throughout this goodly land, whose inhabitants have 
an absorbing interest in one another. How different 
in Europe! with its dozen nations speaking as many 
languages, and rivalries that often degenerate into 
hate. 

- 225. An American tariff should so graduate its 
rates, that it would be applicable to all sections of the 
country and calculated to create a diversity of indus- 
tries, which are essential in making available the vast 
natural resources of the Union. Here is abundant 
scope for the exercise of different shades of talent and 
taste; while the numerous classes of occupations among 
the people are followed by corresponding interchanges 
of the products of such labors. There has never been, 
in the world's history, a field so extensive for the exer- 



216 POLITICAL ECONOMY. 

cise of that mutual good-will among people^ which is 
prophesied by the advocate of free-trade, as in these 
United States; only here it is enjoyed by one nation, 
amid its own people, rather than outside with others. 
A nation of itself, homogeneous to a remarkable 
degree, and withal having facilities hitherto un- 
equalled in moulding into harmony with the great 
mass of its people the foreign immigrants and their 
children. 

226. Free-Trade not Essentially International. — It is 

not necessary for international commerce that either 
or both parties should exchange their products abso- 
lutely free from duty as property ; other considera- 
tions often intervene. For instance, England imports 
wheat and other provisions from the United States 
free of duty because they are, to her, an essential raw 
material in sustaining the people employed in her 
factories; for the same reason, she imports raw cotton 
and silk free from duty. It is her recognized right to 
do so. She has an equal right to impose a duty upon 
these necessaries of life, though she thinks it better 
policy to admit them free, but she imposes a tariff 
upon some other commodities, such as tobacco and 
wine. The United States, in virtue of the same right, 
adopt the policy of importing, free of duty, tea and 
coffee and spices, etc., and from Japan and China, 
unwrought or raw silk for their silk factories and for a 
similar purpose gutta percha and India rubber. They 
are consistent, however, when they impose a duty on 
manufactured silk, since as property in that form, it 



FBEE-TRABE AND PROTECTION— CONTINUED. 217 

partakes of a different character, its value being 
greatly enhanced by the labor that is put upon it, and 
in this form it becomes an unfair competition with our 
own workers in silk, since, owing to the low wages paid 
in Europe, its cost in manufacturing is only about one- 
third as much as the American manufactured silk of 
the same grade. 

227. A Tariff to Sustain Wages. — During the first 
half century or more of our existence as a Nation, 
Congress levied duties on foreign manufactured arti- 
cles brought in for sale, for the purpose of obtaining 
revenue, and also to giv^e our own people an opportu- 
nity to acquire by practice the art of manufacturing for 
themselves. This policy was spoken of as designed to 
aid our '^Infant industries." Free-trade twits the ad- 
vocates of protection concerning the continued infancy 
of American industries, as if the latter imposed the 
tariff of to-day for that special purpose. That phase 
of the subject within a quarter of a century has shifted 
to a different basis, that of sustaining the wages of the 
workpeople. This is deemed of primary, while 
obtaining revenue is recognized as of secondary impor- 
tance. This policy, protectionists maintain, is consist- 
ent with the American idea, that ^^The people 
constitute the State," and that National legislation 
should be just and guard the rights of capitalists — the 
minority — by levying a duty on foreign-made articles 
so as to encourage home manufactures, and also sus- 
tain intact the wages of the workpeople, the great 
majority. 



218 POLITICAL ECONOMY. 

228. Patriotism demands that the comforts and the 
rights of the great class of our wage-earners should be 
secured as far as possible by judicious legislation, and 
that such policy be recognized of primary importance. 
The workpeople of the United States, those who are 
native-born and have enjoyed the advantages of the 
public schools, when compared with the similar class 
in the Old World, are found to stand on a higher plane 
in respect to their education and general intelligence, 
and to the amount of wages they receive and the 
material comforts they enjoy. 

229. Intelligence in Manufacturing. — The remarka- 
ble success that has attended American manufacturing 
of every kind from the first, may be attributed in a 
great measure to the general intelligence of those 
employed. This historical fact is recognized by the 
advocates of protection, in relation to all the mechani- 
cal industries of the country, and they desire to con- 
tinue the same policy. They propose to accomplish 
that end by means of a judicious tariff, one that shall 
in effect sustain the wages of the employes and en- 
courage them to become experts in their work, and at 
the same time produce the requisite revenue. The 
protective system goes still further, and virtually pro- 
poses that, by means of living wages, the industrious, 
economical and temperate among the wage-earners, 
shall be able to enjoy the comforts of life, while their 
self-respect will induce them to seek mental and moral 
improvement. In this connection it may be noted 
that this phase of American statesmanship has 



FREE-TRADE AND PROTECTION— CONTINUED. 219 

attracted attention abroad. The Londofi Times (July 
12, 1880, p. 13,) when speaking of Congress protecting 
American industries for the previous eighteen years, 
says: ^'The object of their statesmen is not to secure 
the largest amount of wealth [revenue] for the country 
generally, but to keep up by whatever means the stand- 
ard of comfort among the laboring classes." On the 
other hand, free-trade virtually ignores the historical 
fact just mentioned, that for the last quarter of a cen- 
tury this has been one important phase of the policy of 
the American protective system. 

230. The friends of protection urge an additional 
reason why this elevation of character and of educa- 
tion among our wage-earners should be promoted. It 
is, that the American employes are on a political equal- 
ity with one another and also with their employers. 
They recognize, likewise, that it is important that the 
workpeople should be so educated in the principles of 
government and political questions which may arise, 
that being citizens they should be competent to vote 
intelligently, since so often their special interests 
become the subject of legislation. 

231. Assertions and Facts.— Free-traders admit that 
the nominal wages of operatives in Europe are lower 
than those paid in the United States by about fifty to 
sixty per cent., but assert that these lower wages secure 
for them the necessaries and comforts of life as much 
as the higher wages do in the United States, for simi- 
lar classes of wage-earners. Protectionists say, that 



220 POLITICAL ECONOMY. 

this assertion is made in the face of statistics, European 
and American, which show that in the main the mode 
of living and comforts in the homes of the workpeo- 
ble of Europe, especially of England, and those of the 
United States are in marked contrast — the great advan- 
tage being on the side of the Americans. They also 
ask the pertinent question. How is it, that the wheat 
and flour of our Northwest, or the beef from our West- 
ern plains should be cheaper for the English operatives, 
with the extra expense of land and ocean transportation, 
than for the American workpeople living on the soil, 
where these provisions are produced in such abun- 
dance? In respect to one item, the answer comes from 
England, that her operatives seldom use meat-food 
because of the expense. Statements as to the better 
living of American employes are made constantly, and 
intelligent persons, who have properly investigated the 
subject, recognize their general truth. 

Free-trade asserts that, '^The tariff law rests on no 
ground of absolute right." As the word^^tariff " is 
used to designate a certain form of tax, protectionists 
inquire. Is taxation on domestic property also wrong ? 
or, does the principle apply only to competing foreign 
property brought into the United States for sale? 
Every civilized nation — right or wrong — taxes not only 
domestic but foreign property, under certain condi- 
tions, thus recognizing the principle, that all property 
should bear its share of the expenses of government, 
which is presumed to protect the civil rights of the 
people as well as their property. 



FREE-TRADE AND PROTECTION— CONTINUED. 221 

232. Wages Seek Their Level. — The rapid and fre- 
quent intercourse of to-day between the nations of 
Christendom facilitates the exchanges of products one 
for another. The influence of this is seen in the ap- 
proach to equalizing the chief item of expense in pro- 
ducing manufactured goods — that is, the wages. In 
seeking their level in different countries, wages follow 
a law as inflexible as that of gravitation. This process 
will continue because rival manufacturers in the Old 
World are tempted to press the wages of their employes 
down to the lowest point, which they are enablerto do, 
in consequence of the overcrowded populations amid 
which they carry on their business. Under these cir- 
cumstances, say the protectionists, the only salvation 
for the American workpeople is in Congress imposing 
a tariff to equalize as near as possible the difference in 
the wages paid respectively in Europe and in the 
United Sta..tes. On this principle the Americans, with- 
out reference to what is paid abroad, pay living wages 
to their own employes, while the Government, as a 
general rule, taxes for its own support the foreign- 
made competing article, but in no instance to the full 
amount of the difference in the respective wages paid. 
Free-trade assumes this policy to be in the way of pro- 
moting good-will among the nations and hard on the 
foreign manufacturer and his operatives. Protection 
retorts that we act in self-defence, to prevent our own 
workpeople being handed over to the tender mercies of 
foreign manufacturers, who, for the most part, secure 
for themselves alone the main benefit of the low wages 
they pay. 



222 POLITICAL ECONOMY. 

233. Cheap Commodities not the Only Good Desirable. 

— Free-trade appears to assume that the greatest gain 
to the American people would be in having cheap com- 
modities, but protection argues that it is better to give 
employment at living wages and let the cheapness take 
care of itself, since competition at home, as it always 
has done, soon brings the price of the manufactured 
articles down in proportion to the cost of their pro- 
duction. This mode is fair to the manufacturers, and, 
in respect to their wages, to those whom they employ, 
while the consumer standing on the same level, 
pays a fair price. The American manufacturers and 
merchants and workpeople are all consumers, and 
virtually exchange their products, the results of 
many diversified labors, with one another, and though 
these various commodities may be nominally high- 
priced, yet they are cheap, because each one pays 
easily — that is, his own labor furnishes his means of 
purchasing. 

234. Our Home Free-trade Aided by the Tariff.— The 

advocates of free-trade deride the apprehension of pro- 
tectionists, that if that system prevailed between the 
United States and Europe, it would ruin or greatly 
injure our own manufacturers. In proof they adduce 
the opinion, that if such ruin would be the result, the 
new States of the Union in which perfect free-trade 
prevails, would be unable to manufacture to advantage, 
if at all, by the competition of the older ones, for in- 
stance, New England. Yet it is found, in practice, that 
the new States of the West, when they have a popula- 



FREE-TRADE AND PROTECTION— CONTINUED. 228 

tion sufficient to furnish employes to do the work, 
enter upon whatever form of manufacturing for which 
they have facilities, and are successful in the enter- 
prise. The implied inference is adduced that free-trade 
between the nations of the world would produce simi- 
lar results. These advocates ignore the very impor- 
tant fact, that the tariff on similar foreign manufact- 
ures is as effective in Wisconsin as in Massachusetts, 
and that the competition is between the American 
manufacturers themselves and not between them and 
the Europeans, with the latters' advantages of low 
wages. 

235. HistoricallUustrations. — The pupil would do 
well to remember that when the Americans one hun- 
dred years ago began to manufacture for themselves 
they were comparatively ignorant of the process of mak- 
ing many of the ordinary domestic articles wiiich they 
needed. They first learned, and that but partially, to 
work in the more common mechanical industries, and 
afterward acquired experience in conducting manu- 
facturing establishments. To do this took nearly half 
a century. But how marked the contrast to-day ! 
The skill and experience thus acquired have been made 
available for the benefit of the whole American people. 
The protectionists in proof adduce the fact that the 
woolen and the cotton factories and numerous others, 
such as iron-works, factories for making agricultural 
implements, and even those that produce articles of a 
finer grade such as watches, or paper, when established 
in the Western States, started fully equipped. They 



224 POLITICAL ECONOMY. 

had all the facilities; perfected machinery; competent 
managers from the East, and employes on the spot 
more or less intelligent, and these were often instructed 
to become skillful by those who migrated thither from 
the mills in the older States in order to find better em- 
ployment in the newer. Even, if for awhile experience 
has to be acquired, the cheapness in living near wheat- 
and corn-fields and pasture-lands counterbalances the 
advantages attributed to the older manufacturing estab- 
lishments in the East. The same is true of recent cot- 
ton and iron manufacturing in the Southern States. 
Their mills start into being equipped with the best 
machinery in use, while their operatives soon acquire 
sufficient knowledge to handle the machines. 

336. A Just Comparison Adduced. — It is not strictly 
fair to compare the influence of free-trade with the 
outside world, with that which obtains within the 
United States — the cases are not parallel. The latter 
is guarded by a cordon of protective duties levied all 
along the boundary lines of the Union, as a defense 
against the low cost of production of competing articles 
in the outside world. In addition, these duties are not 
subject to changes, unless necessity demands, and that 
process is sufficiently slow to give warning in public 
discussions, so that the manufacturers and the people 
become prepared to meet them. This is far different 
from being subjected to the sudden whims and power 
of foreign manufacturers, under a free-trade system 
with other nations. On the contrary, the competitive 
rivalries are within our own family, from which the 



FREE-TRABE AND FROTECTION— CONTINUED. 225 

neighbors are properly excluded, or let in, under condi- 
tions that will not injure the welfare of the separate 
members of the household. 

237. Reciprocity. — Political Economy takes cogni- 
zance of the trade that is carried on between nations. 
The latter sometimes make special arrangements with 
each other in respect to the duties that may or may 
not be levied upon certain commodities, which they ex- 
change in the way of trade. Such arrangement is known 
as reciprocity, which is defined as ^^a treaty concluded 
between two countries, conferring equal privileges as 
regards customs or charges on imports, and in other 
respects."' The position of the United States among 
the nations is unique, inasmuch as from the great ex- 
tent of their territory, and, in consequence, climatic 
differences, the productions of their fertile soil are most 
prolific, as well as of great variety; while at the same 
time they are, also, very extensively engaged in me- 
chanical industries, and that sufficiently to supply, for 
the most part, the wants of their own people. Under 
these conditions, reciprocity in trade is peculiarly 
available for the United States, especially with those 
nations which have small manufacturing interests, but 
on the contrary, large agricultural industry, suited to a 
tropical climate. 

238.— The United States, in addition to the prod- 
ucts of their mechanical industries, produce also a 
vast surplus of the necessaries of life, in the form of 
the different kinds of grain and other food provisions. 



226 POLITICAL ECONOMY. 

It is clear, that reciprocity with the nations mentioned 
above, cannot interfere with, nor of necessity modify a 
tariff that is imposed upon articles, the products of 
the mechanical industries of European nations, and 
which articles are brought into the markets of the 
Union for sale in competition with our own manufact- 
ures of a similar class. The two modes of adjustment 
are distinct and independent of one another. Accord- 
ing to this statement, reciprocity, when applied to the 
United States, has special relation to those countries 
whose productions are agricultural, and due to climatic 
influences, such as coffee, tea, chocolate, sugar, etc., all 
of which aid in promoting the domestic comfort of the 
American people. In addition, there is anotlier class 
admitted free of duty, that may be termed raw mate- 
rial, and which is essential for our manufacturing 
purposes, such as India rubber, gutta percha, in their 
native state, and raw or unmanufactured silk. We 
may illustrate the policy of reciprocity by an example: 
Let it be understood, that we impose no duty on coffee 
and India rubber, and Brazil, acting reciprocity, ad- 
mits on the same terms, or nearly so, the flour and the 
provisions,, which we send to pay for the coffee and the 
rubber. 

Bounties. — Congress, for the benefit of the great mass 
of the American people, repealed in 1890 the duty on 
sugar — that article being so essential to the comfoi't of 
every household in the Union. In connection with 
the measure of reciprocity contained in the same bill, 
was a clause authorizing a bounty of two cents for 



FREE TRADE AND PROTECTION— CONTINUED. 227 

every pound of sugar produced by home industry. In 
proportion to the vast amount of foreign sugar we use, 
when compared with that of the home-made, the for- 
mer is virtually a commodity on which the foreign 
producer places his own price, and therefore, the 
duty imposed upon it is paid by the consumer — tlie 
American people — in accordance witli the princi- 
ples already noted, (See pp. 133-34.) The price 
of sugar in the Union has in consequence been low- 
ered in proportion to the amount of the duty once 
imposed, an annual saving of about $50,000,000 to the 
families who use sugar. 

The Act of Justice. — It was proper and just for the 
government to give such a bounty, since those who 
were engaged in the business of manufacturing sugar 
from cane, sorghum, and beets had in that industry a 
large amount of capital invested, and also employed a 
great number of laborers. These three sources of 
sugar being susceptible of almost an indefinite increase 
of quantity, suggested the propriety of aiding that in- 
dustry by means of bounties. The policy thus entered 
upon is designed to be far-reaching in its influence, 
since the American people may, in time, so improve 
the methods of obtaining sugar from these, their own 
sources, as to be able, finally, to supply themselves. 
Some countries of Europe — notably France and Ger- 
many — have thus, from feeble beginnings, supplied 
themselves almost entirely from the sugar-beet alone. 
We have the advantage of a climate wherein sorghum 
can be easily raised, and likewise the sugar-beet, and in 



228 POLITICAL ECONOMY. 

addition, we possess a large semi-tropical territory, in 
which, by exercising proper care, the sugar-cane can 
be successfully cultivated. 



XXVII. 

FOR REVENUE ONLY. 

239-247. As the name implies, this scheme of a 
tariff makes it of primary importance to obtain 
revenue, and, in consequence, other considerations con- 
nected therewith are deemed only secondary. A 
tariff, however low or high in its rate, is to that 
extent a protection to those of our industries with 
which the foreign articles compete, but in accordance 
with this scheme or mode, its protective qualities are 
held subordinate to the announced design of obtaining 
revenue only. Eecognizing the former principle as 
being of secondary importance, the advocates '*for 
revenue only " have usually expressed their meaning 
by the phrase incidental protection, as applied to our 
own industries. This scheme places the National gov- 
ernment in the position of a mere collector of revenue, 
while it seems to have little regard to the effect pro- 
duced upon that class of American manufactures, 
which compete with similar foreign-made articles, 
brought into the market of the Union for sale, and 
which are produced abroad at much less cost. Under 
such conditions the American manufacturer is com- 
pelled to withdraw from the contest or run his mills at 
a loss, since his employes are unwilling, as they always 



230 POLITICAL ECONOMY. 

are and have a right to be, to have their wages dimin- 
ished sufficiently to meet in our own market on equal 
terms the product of the low wages paid in Europe. 
No tariff " for revenue only/' in respect to the cost of 
production of similar articles has hitherto equalled 
the difference in such cost in Europe and in the 
United States; if it did so, it would then be properly 
protective — an element which its advocates repudiate. 
The '^for revenue only^' system virtually donates that 
difference, whatever it may be, to the foreign manu- 
facturer, who having paid the required low duty enters 
his merchandise in our market at a correspondingly 
low rate — so low as to interfere with the fair wages of 
our own workpeople. 

240. To Whom the Greater Benefit Accrues.— The 
history of American mechanical industries shows 
clearly the difficulty of adjusting the tariff '' for 
revenue only," in such manner as to secure the desired 
revenue and at the same time not lower the wages of 
our own workpeople, if they have employment at all. 

It is found that in every instance a tariff whose rate 
lid not equal or nearly so the difference in the wages 
[);iid in the United States, and those paid in Europe, 
brought injury upon our mechanical industries. In 
such case, those who work for wages, rather than the 
employers, are the greater sufferers, as it is estimated 
by practical men who have had experience in such 
matters, that for every hundred cents expended in 
American manufacturing, from eighty-five to ninety go 
to the wages of the workpeople. 



FOB REVENUE ONLY. 231 

241. The Comparative Value of Raw Material. — 

When treating of manufacturing, the pupil will notice 
two special items of expense — the raw material and the 
labor expended. For illustration: a piece of parlor fur- 
niture may cost the consumer or purchaser one 
hundred and fifty dollars, though the entire raw mate- 
rial of which it is made costs only ten or fifteen. In 
estimating the latter cost, we take the material as it is 
prepared for the hands of the cabinet-maker, for if we 
went back to the original, we would find the ore in 
the mine and the wood in the forest, and both useless 
until the labor of man imparted value to them. The 
same general principle holds true in all forms of man- 
ufacturing. Its truth is verified when a famous ship- 
builder * declares that from eighty-five to ninety per 
cent, of the cost of an iron steamship is in the wages 
paid the workmen. The raw material from which is 
made a piano, worth a thousand dollars, does not cost 
more than about forty. The fine wool from which is 
made a gentleman's suit selling for a hundred dollars 
cost only three or four. It follows from these illustra- 
tions that it is very misleading to represent the cost of 
the raw material as an influential element in enhancing 
the price of the final product. 

A bale of Sea-island cotton is sent from Charleston, 
S. C. to Switzerland, France or England and is there 
manufactured into delicate muslins or fine thread and 
sent back to the United States for sale ; meanwhile, by 
this process, the original cotton has increased in value 

* The late John Koach of Philadelphia. 



282 POLITICAL ECOJSOMY. 

ten to twenty-fold. It is well-known that the nation 
which exports its raw material becomes impoverished, 
while the one that imports the same and manufactures 
it becomes rich. The correct method is in the judi- 
cious blending of the two systems — that is, manufact- 
ure the portion of the raw material which is needed 
for home consumption and export the remainder for 
sale abroad. The American manufacturer of cotton 
thread at Willimantic, Connecticut, or Newark, New 
Jersey, gets his raw material. Sea-island cotton, free of 
duty, yet because of the low wages paid at Paisley, 
Scotland, he cannot compete on an equality with the 
Scotchman. 

242. The Summary. — The advocates of free-trade 
claim for their system a trade throughout the world, 
unvexed by tariffs or custom-house officers. They pro- 
pose, by this free interchange among the nations, to 
bring about a state of kind feeling and mutual good- 
will between all civilized peoples; ^^to create a com- 
mon interest, out of which grow the bonds of abiding 
friendship.''^ Division of labor is, also, to be extended 
and adjusted so that every nation shall produce that 
which it can to the best advantage, and exchange it 
for what it desires of the productions of its neighbors. 
The theory ignores the innumerable difficulties in the 
way of so desirable results, that arise from different 
tastes and acquirements of the many peoples of the 
world, in respect to their grade of civilization and re- 
finement, and mechanical skill, while in relation to 
the United States, it overlooks the direct tax that must 



FOB REVENUE ONLY. 233 

be raised to support the National government. On 
the contrary, if we adopt the system of free-trade, and 
consequently dispense with the revenue annually de- 
rived from the tariff on a portion of the $900,000,000 
worth of foreign property brought into the Union for 
sale, the deficiency must be made up from other 
sources. 

243. A Primary Object. — The advocates of a tariff 
for revenue only intend as its primary object the obtain- 
ing revenue, and for that purpose they would mainly 
adjust the duties imposed. Other considerations in re- 
spect to the encouragement of our own comioeting 
industries are held subordinate, and the estimate of 
their relative importance is plainly indicated by what 
is vaguely promised them, by the phrase incidental 
protection. Protectionists object to a tariff adapted to 
such purpose alone, as it must necessarily leave so 
small a margin between the difference of the cost of 
competing articles made in the United States, and 
those in Europe, inasmuch as it becomes easy for for- 
eign manufacturers, or their agents, to place goods in 
our market at a rate so low as to crush our competing 
mechanical industries, then afterward remunerate 
themselves by raising the prices. Foreign manufact- 
urers have adopted this plan two or three times. 
When our tariff is high, it is much more difficult to 
succeed in such operations, since it would cost too 
much to first pay the required duty and then enter 
the goods at a rate so low as to break down our com- 
peting manufacturers. History records instances in 



234 POLITICAL ECONOMY. 

the experience of American industries, wliich have 
been thus crippled, or, for the time, ruined entirely. 
The protectionists urge that Congress ought to heed 
the warnings, as well as recognize the encouragements, 
found in our history. They cite the influence of free- 
trade, which in six years (1783-1789) ''swept from the 
Nation, every silver dollar and piece of gold," and also 
the effect of the "for revenue only" theory put in 
practice in 1833, when a horizontal tariff of twenty per 
cent, on all foreign merchandise was nearly reached. 
This rate was without any reference to the relation 
which the numerous foreign articles thus taxed bore 
to similar domestic ones that competed with them in 
our own market. The result was that the Treasury of 
the United States became richer and riclier, and the 
people poorer and poorer; finally the former had 
140,000,000 surplus, and the latter were bankrupt. 
These results were produced, not because the tariff was 
high, but because it was low. Then followed, under 
the circumstances, the most tremendous financial crash 
in our history — that of 1837. 

244. A Secondary Object — On the other hand, the 
advocates of protection claim that to secure revenue is 
secondary in importance to affording employment to 
our own workpeople, and the profitable investment of 
our capital. They contend that both these ends have 
been attained under the protective system, when it has 
been carried out and not interfered with by adverse leg- 
islation. They claim that the tariff ought to be so 
adjusted that no manufactured foreign property could 



FOR REVENUE ONLY. 2'So 

be admitted to our market that did not have imposed 
upon it a duty sufficiently high to equalize the cost of 
production of similar domestic articles, in order that 
they both should meet as competitors in our own mar- 
ket on equal terms; and that on this ground no foreign 
article would be excluded, but welcomed, because of 
the revenue it would afford. They argue that because 
the foreign manufacturer, owing to the lower wages he 
pays, can put his goods in the other markets of the 
world at a certain per cent, cheaper than the Ameri- 
can is no reason why he should do the same in the 
markets of the United States. 

The protectionists are in favor of a high tariff on 
luxuries of any kind whatever that are brought in for 
sale. If the wealthy wish to gratify their taste in 
that line, they can have the opportunity to pay the 
corresponding high duties, and thus aid in supporting 
the National government. Under the shadow of 
this high tariff our own workpeople, if they have 
not yet become sufficiently skillful to produce the 
most expensive kinds, can make similar articles of a 
lower grade, as in certain classes of cloths and silks. 
Finally, the protectionist theory is claimed by its advo- 
cates to be pre-eminently the friend of the great body 
of the people — those who work for wages — inasmuch as 
it purposes to legislate so as to afford them opportuni- 
ties of obtaining a self-respecting and comfortable sup- 
port. 

245. Two Modes of Regulating the Revenue. — The 
mode proposed by the advocates of a low tariff, in order 



236 POLITICAL ECONOMY. 

if necessary, to diminish the revenue derived from im^ 
port duties, is radically different from that proposed 
by the protectionists — the former would lower the rate 
of the tariff, the latter would raise it. Our financial 
history shows that the effect of the former mode has 
always been to increase the revenue, because under its 
influence the productions of home industries, that Avere 
specially affected by a low tariff, speedily fell off alto- 
gether, since the workmen thus engaged were unwill- 
ing to accept the wages lowered to the standard of 
those paid abroad. Such reduction was the only way 
in which the American manufacturers of the same 
class of goods could compete with the foreign make. 
In consequence the latter were able to obtain the con- 
trol of our own market and send in an immense 
amount of merchandise, and yet the rate of duty was 
so low that the revenue became very large because of 
the vast quantities imported. This result has occurred 
in our financial history whenever the rate of the tariff 
has been so reduced as to demand a corresponding 
reduction in the wages of the American employes. 

246. On the contrary, an important object is at- 
tained when the tariff is high, yet sufficiently low to 
permit foreign merchandise, especially of the higher 
grades, to enter our market, and thereby furnish the 
amount of revenue required. In addition, our own 
workpeople, who, meanwhile, are engaged in manufact- 
uring a similar class of goods — but of a lower grade 
of finish — are fully employed and at remunerative 
wages, while for the most part they supply our owii 



FOR REVENUE ONLY. 237 

wants. This mode of the protectionists claims several 
objects, such as: the revenue is graduated to what is 
desired; our own workpeople have employment at 
living wages, while our mechanical industries are pro- 
moted, and soon competition renders their produc- 
tions so reasonable in price as to be fair to the 
American consumer. 

247. Trusts.— When dealers are in free and open 
competition with one another, they sometimes have a 
tacit understanding as to the prices at which they sell, 
but it occasionally occurs that some of the trade play 
false by ^'cutting prices," in order to secure a greater 
share of the business. This is not honorable, nor in 
the main profitable, since, frequently, in this manner 
prices are forced down below what is just to the pro- 
ducer and the dealer. This evil sometimes induces a 
portion of the dissatisfied dealers to combine in what 
is termed a ^^ Trust." The effect of this is to break up 
the free and open competition between the many, and 
to concentrate the trade in the hands of the few. The 
managers of a ^' Trust," can scarcely resist the tempta- 
tion, when they have secured the control of the market, 
to raise prices to the detriment of the consumers. 
The result is usually a monopoly which the American 
people, in their desire for fair play, always condemn, 
and even go so far as by their patronage to assist outside 
competition in bringing such monopoly to terms. The 
consumers are aided in this their effort, by the well- 
known effect, that when prices are unreasonably raised 
the sales fall off in proportion and the scheme of the 



238 POLITICAL ECONOMY. 

Trust no longer prospers. No doubt a Trust having a 
large plant and engaged in manufacturing, for instance, 
has facilities for producing articles at a lower rate of 
cost than those who have no such enlarged means, be- 
cause the former can utilize to much better advantage 
the service of its employes. By this means and other 
devices Trusts can drive out the small manufacturers 
or the dealers. 

Under certain conditions a Trust or Company may 
virtually become a monopoly, as when the commodity 
furnished is a natural product and the Company has 
obtained possession of the territory that produces it. 

Laws have been enacted in some States to prevent 
the possible evils of an absolute monopoly of " Trusts," 
doing injury to the community at large, whose numer- 
ous rights are worthy of being guarded. 



xxyiii. 

SOCIALISM. 

248-252. Within recent years a system of socialism 
has appeared in the United States. This subject may 
not strictly belong to abstract political economy, yet 
it is an economical question suitable at this time 
for American young people to discuss. Socialism is 
defined as ^^the doctrine of a community of property, 
or the denial of individual rights in property,'^ and also 
as ^^a system that appeals to the State rather than 
individual action/' that is, for *^ state help as opposed 
to self-help. '' 

The system is foreign, originated in Europe, and 
its germs have been transplanted to the United 
States. Here such economical ideas have never 
been prevalent in the minds of the native-born, 
though there has been a very limited number of mild 
enthusiasts, who in a few instances have endeavored 
to introduce similar associations, but they failed and 
the members quietly crept back to their normal condi- 
tion as citizens. It is impossible for the system to 
take root to much extent in the United States. The 
intelligence of the people forbids it, as they are 
free to put in practice their respective abilities, be 
they what they ma}^, and, as citizens on a political 



240 POLITICAL ECONOMY. 

equality with one another, they have an untrammeied 
right to honestly improve their condition. The gov- 
ernment by protecting each one in his individual rights, 
fosters self-respect and self-reliance, and independence 
of character. This is remarkably in contrast with the 
so-called paternal governments of Continental Europe. 
There the working classes, owing to the tacit subser- 
vience to custom, are inclined to look to the govern- 
ment for direction in their industrial affairs, while, in 
the United States, the native-born intelligently and 
self-reliantly engage in industrial pursuits that are 
congenial, and look to themselves for success. 

249. The Gaste Influence. — It may be said, that in 
the United States there is no class distinction in the ac- 
quisition of wealth and the position which its mere pos- 
session brings, as the way is open to all. But in Europe 
there exists a framework of society — a crushing caste 
influence — shelving down from the throne, through 
grades of nobles and of ^' higher and middle classes " 
to the lowest order. To rise above the rank in which 
they happen to be born is a fortune attained by very 
few indeed. The tendency of such influence is to 
depress the energy and spirit of the people — especially, 
the younger portion — to such an extent, that they are 
cramped in their efforts to make the progress which 
their higher aspirations demand. 

250. Aims of Socialism. — The forms of socialism that 
have in them a religious element have been more 
permanent than those, which, lii the ordinary sense. 



SOCIALISM. 241 

have been devoid of such sentiment. The aim of 
socialistic communities has been uniformly to impair 
the marriage and family relation, and to place them- 
selves in opposition to a civilization based on the 
Christian idea of the family, as constituted by the 
parents and children. When the Christian element in 
the family organization is eliminated, socialism degen- 
erates into universal scepticism and has a tendency 
to end in anarchy. 

The cases are very few wherein socialism has been 
established and also successful ; in truth such associa- 
tions always in due time turn out failures, dwindle 
away and finally disappear, while those in existence to- 
day have in them the seeds of disintegration and death, 
since they appeal to the selfishness of human nature 
rather than to its generous impulses. 

251. In theory, socialism professes to aim at elevating 
man, and the object is a worthy one ; but unfortunately 
the means employed are antagonistic to human nature 
and the order of society, which order is the outgrowth 
of the experience and labors of more good men than 
bad, during the centuries while under the benign 
'infiuence of Christianity, whose fundamental law is the 
Golden Eule. The result is that each generation is an 
improvement upon the preceding. The process has 
been slow but sure in its advancement. Socialism, on 
the other hand, purposes to elevate man by changing 
radically the present order of things; it would diminish 
the responsibility of the individual and merge it in the 
community at large ; would ignore the characteristics 



242 (POLITICAL ECONOMY. 

of persons, putting on the same level the energetic and 
industrious with the sluggish and the idle; would 
enforce equality in conditions, thus neutralizing the 
efforts of the individual to develop his native tal- 
ent, whatever that may be. An insuperable barrier 
intervenes, inasmuch as, neither socialism nor any 
theory can obliterate the truth, that no two individuals 
are precisely alike in their mental, moral and physical 
characteristics. In addition, each one in advancing 
toward perfection in his own sphere, must move in the 
line that the Creator has marked out, and not be 
governed by arbitrary rules, which are often subversive 
of the established laws of the nature of men. Accord- 
ing to socialism the State should own the land and the 
capital and direct the labor, thus stifting the individ- 
uality of the members of the community; placing all 
upon a level, without reference to each one's capacity. 
Such a system must degenerate into an intolerable 
tyranny, retarding progress in every respect under the 
plea of equality, against which justice and common- 
sense revolt. But the worst form is its bad moral 
influence in breaking up the family relation with its 
safeguards, and the genuine and peculiar affec- 
tion found only within the precincts of the house- 
hold. From another point of view the system would 
neutralize all exertions to attain wealth, as private 
ownership of property would be unknown. 

252. State Aid Limited. — The State cannot and 
ought not aid the citizens in ordinary circumstances, 
wherein they can help themselves. Its proper sphere 



SOCIALISM. 243 

is to protect the individual in his rights and thus afford 
him an opportunity to develop what may be good and 
worthy of cherishing in his own personal capacity. 
Socialism appeals to the State, yet the latter cannot 
suspend the law long since enacted, that man must eat 
bread by the sweat of his face! There must be pro- 
duction and it must be the result of labor; the field 
will not produce wheat unless it is properly cultivated, 
nor will the yard of cloth be woven without skill and 
exertion. The civilized world has had experience in 
the ages past in permitting each individual, so long as 
he did not interfere with the rights of others, to do the 
best he could for himself, seek wealth and comfort in 
his own way, exercising his judgment in the application 
of his labor, be it of muscle or of brain. The American 
people by means of their institutions supply the 
conditions by which all can. aid themselves by indus- 
trious, economical and temperate habits, to acquire 
sufficient to live upon comfortably and lay by also for 
future wants. If misfortune overtakes them, they are 
then proper objects for the benevolence of their fellow- 
citizens to put them in the way of again earning a 
livelihood. 

253. The Results of Socialism.— In conclusion, the 
system of socialism has a demoralizing mental and 
moral effect upon its adherents. The rank and file 
become indifferent and idle, since they have no motive 
for active work. They cannot have the same interest 
in the progress of an association, as in their own 
individual affairs. This is natural and in accordance 



244 POLITICAL ECONOMY. 

with self-interest, a governing principle in human con- 
duct, especially in relation to the labor of production. 
This is the secret of the failure of all such associations 
to develop the full manhood of man or womanhood of 
woman. The members acquire no self-reliance and 
little self-respect, but spend their time lamenting 
what they call their hard lot. 



XXIX. 

RAILROAD CORPORATIONS. 

254-259. In the distribution of the products of labor 
the means of transportation deserves notice in a Polit- 
ical Economy. Their increase keeps pace with the 
increase of the products themselves, and the demand for 
the latter to satisfy the wants of the people. The rail- 
ways of the United States come within this view, they 
being essential in promoting the progress of our indus- 
tries, since they afford facilities for the distribution 
of their varied products to all the people of the Union. 
This important function of extending roads or common 
highways for the public benefit, has always been exer- 
cised by the government in civilized communities. To 
accomplish this it is necessary for the good of the 
whole that the government should have in itself what 
is termed in law '^ eminent domain, ^^ by which private 
property can be taken for the public good, but as far as 
possible at a just valuation. 

255. To construct and operate railways requires a 
great number of persons and a large amount of capi- 
tal, and both of these must be combined to perfect the 
design. Corporations are formed for the purpose to 
whom the State gives charters under certain condi- 



246 POLITICAL ECONOMY, 

tioiis, and in accordance with the latter the roads are 
constructed and operated. It is the duty of the State 
to guard the interests of the people and also the rights 
of the corporations, and if the latter do not comply 
with the conditions imposed and accepted, the former 
can take away their charter. 

256. How Organized. — The capital of the corpora- 
tion is divided into shares of an amount agreed upon ; 
for these shares persons subscribe. All the capital 
may be paid in at once or by instalments as it may be 
needed in the construction or in providing equipments 
for the road. The building of the road being a public 
benefit, the people in consequence become interested 
and subscribe accordingly. The corporation is com- 
posed of all the stockholders. The latter proceed to 
organize by electing a Board of Directors, to whom is 
intrusted the management of the affairs of the com- 
pany, and who hold office usually for one year, but 
may be re-elected at the will of the stockholders. 
The votes cast at such meetings are in proportion to the 
shares held by the stockholder voting, or sometimes, as 
a matter of convenience, the absent can vote by proxies. 

257. Public and Private Interests. — The combina- 
tion of private enterprise with the protecting care of 
the government, accomplishes the end more perfectly 
than if each acted separately. The energies of the 
corporators are fully exercised and they themselves are 
encouraged by the hope of reward, since their rights 
are secured under the charter of corporation. The lat- 



BAILROAD COBPORATIONS. 247 

ter is authorized to receive, to hold and to convey prop- 
erty ; it can enter into contracts ; can borrow money 
or incur debt, can be sued in the courts and can 
itself sue. They have in that respect all the rights 
of a citizen ; though, in addition, the corporation is 
authorized to take property needed for carrying out its 
legitimate designs, under the plea that it is for the 
public good; yet it is also bound under appropriate 
rules to remunerate at a fair value the owners of the 
property thus taken. 

258. The Agent of the State.— The corporation of a 
railroad is an agent of the State to establish a highway 
for the use of the public in promoting intercourse and 
commerce between the different portions of the land. 
In doing so it performs a public service. The corpora- 
tion is held responsible to the State for the performance 
of its duties as a public carrier. The stockholders 
are entitled to a just compensation for their capital 
thus invested ; the shares they own are private property, 
and they have a right to whatever profits that accrue 
from them ; the profits come in the form of fares for 
passengers and freightage for carrying property, the 
public enjoying such conveyance and paying for the 
service. In an extensive territory like the United 
States, experiment has shown that the most efficient 
mode of transportation within their boundaries is by 
means of organizations or corporations of private 
individuals. The State authorities impose reason- 
able conditions, so as to guard the interests of both 
parties concerned — the public and the incorporators. 



248 POLITICAL ECONOMY. 

259. The Advantages of Railways.— The benefits that 
accrue to the American people from railways are 
almost innumerable ; they are intimately connected 
with nearly every form of their industries, since they 
greatly promote exchanges of the products of one sec- 
tion of the country for those of another, and thus 
make available for all, the separate and peculiar advan- 
tages which the different sections of the country 
possess. Provisions from the West and manufactures 
from the East pass and repass on these roads, while a 
similar process is going on North and South, much to 
the advantages of all parties. They aid both capital 
and labor and equalize prices, while reducing the 
expenses of living by making these exchanges cheap 
and prompt. By this means our home market is 
a vast benefit to all the people whose surplus of 
different products is brought by the same roads to 
the seaboard for transportation to foreign lands to be 
exchanged for what we cannot produce ourselves. 
Their stimulating influence pervades the whole land ; 
reaches the remote farms of the West and the fruit- 
gardens and plantations of the South ; the mines of 
metalb within the mountains and the manufacturing 
interests everywhere. They encourage settlements — 
where there is room along their lines — and promote 
the general prosperity of the people of every section. 
With Americans this is a great National benefit, as they 
aid in uniting the people of the various sections in 
bonds of sympathy which will increase from year to 
year, because of this personal and commercial inter- 
course. I 

I 



XXX. 

THE NATIONAL DEBT. 

260-267. The United States have been compli- 
mented by European statesmen as a "debt-paying 
nation." Our first debt was incurred during the 
Revolutionary War, in which the patriots borrowed 
money from France and Holland. Immediately after 
we became a Nation, in Washington's Administration, 
the government took measures to pay off the foreign 
debt and also, in connection with it, the domestic debts 
of the States, that were incurred by the same war and 
which the National government now assumed. 

The Nation's Debts at Different Periods. — This first 
National debt in round numbers amounted to 176,000,- 
000 ; that was about nineteen dollars for each person 
in the Nation. Owing to the exhausted condition of 
the country, this was by far the most burdensome debt 
the American people ever incurred, yet it was grad- 
ually being paid off when the war of 1812 occurred, 
which added to it materially. After its close the gov- 
ernment commenced paying that also, and in 1835 
the Nation freed itself of debt. Afterward (1846) 
came the Mexican War and its debt, which had 
diminished to $87,000,000 when the Civil War com- 



250 POLITICAL ECONOMY. 

menced. The National debt at its close reached the 
enormous sum of 12^807,000,000 which, according to 
the census of 1860, was 1126 for each white man, 
woman and child in the Nation. That debt on Novem- 
ber 30, 1891, after deducting the ca'Sh in the Treasury, 
was 1733,333,398.08. Of this 1316,681,016.00 does not 
pay interest. This debt is now about eleven dollars 
per capita. 

261. Modes of Obtaining Funds. — Since it will proba- 
bly be many years before we are again free from debt 
and the subject will, no doubt, recur often in the 
course of National legislation, it would be well for the 
student to understand the mode in which the funds 
were obtained to defray the expenses thus suddenly 
thrust upon the Nation. 

262. The Dilemma. — In the Eevolution, our fathers 
did the best they could, though they were compelled to 
go outside their own borders to obtain loans; but in 
the last instance — the Civil War — the American peo- 
ple depended upon their own resources. When the 
war broke out, the government was in a dilemma how to 
obtain revenue ; its officials, not having the power to 
know the end from the beginning, moved very cau- 
tiously and, time has shown, judiciously. No one 
thought the war would last so long ; indeed sanguine 
statesmen prophesied that the difficulty would be 
arranged within a few months. Tlie officials of the 
government had to feel their way prudently. If 
Congress had imposed a direct tax to meet tlie rap- 



THE NATIONAL DEBT. 251 

idly accruing expenses, it would have risked rousing 
into open action the enmity of the secret friends of the 
Rebellion in the loyal States, and so it was deemed 
more prudent and expedient to raise funds by some 
system of borrowing from the people themselves, thus 
appealing to those who were loyal to the Union to 
loan the government money by purchasing its bonds. 

263. Summary of Funds Appropriated. — Congress at 
different times, as necessity required, authorized the 
secretary of the treasury — the first time in July, 1861 
— to borrow 250 million dollars ; then in February, 
1862, 500 ; in March, 1863, 600 ; in June, 1864, 400 ; 
and in March, 1865, 600; in all 2,350 millions. 
Sometimes the secretary was unable to borrow the full 
amount for which he was authorized to ask. Thus the 
government obtained loans from time to time as the 
war was protracted. There were many difficulties in the 
way that we need not here enumerate, but the pupil is 
earnestly advised to study the financial features of 
that period of our history. 

264. Different Classes of Bonds. — The general mode 
of borrowing was simple. The government issued 
bonds calling for so much money at a specified rate of 
interest, and to run for a certain number of years, but 
had the right to call them in and pay them off during a 
definite term previous to the extreme limit. The spec- 
ified rate of interest was guaranteed by the coupons 
attached to the bond. On the coupon was noted the 
amount of interest for each payment — semi-annually 



252 POLITICAL ECONOMY. 

or quarterly, as the case might be. The owner has 
merely to cot off the coupon and present it at the 
United States Treasury and the interest it calls for is 
paid. 

When the name of the owner of a bond and its num- 
ber are recorded in the books of the United States 
Treasury, it is said to be registered. If such bond 
itself should happen to be destroyed or lost, the owner, 
on authenticating that fact, can obtain from the treas- 
ury its amount, principal and interest. But, if a bond 
is not registered, the owner would lose it, should it be 
destroyed. 

2Go. When these bonds were issued, some were so 
named as to designate the time they could run. For 
illustration, a *^ five-twenty," was one that the govern- 
ment could call in in five years, but was not obliged to 
pay before twenty ; a " ten-forty," was redeemable 
within ten years, but was due in forty. Another class 
of promises to pay or notes was known as the *' seven- 
thirties," from the rate of interest they paid, 7.30 per 
cent, that rate being two cents a day for each hundred 
dollars. These were payable with the accrued interest 
in three years. They have all been called in. 

Certain other notes, or promises to pay, are popu- 
larly called ''^greenbacks," from the peculiar color 
of their backs, though in the enactments author- 
izing them they were designated ** United States 
Notes." These were declared to be " lawful money and a 
legal tender in the payment of all debts, public and 
private, within the United States, except duties on 



THE NATIONAL DEBT. 2b'6 

imports and interest on the public debt," which latter 
were required to be paid in coin. The government 
demanded coin in payment of import duties, and thus 
it was able to pay the interest on its own bonds in 
coin. Greenbacks soon passed into general use, and so 
continue. On these the government pays no interest. 
Their aggregate amount in circulation in 1892 is about 
three hundred and seventeen million dollars. 

266. Toward the close of the war it was found ex- 
pedient to issue bonds at a comparatively low rate 
(four and a-half and four per cent.), but in order to 
promote their sale they were to run for a number of 
years. This feature materially enhanced their value 
and they became popular— those at the first rate 
mentioned were due in 1891, and those at the second in 
1907. These two classes of bonds commanded a 
premium. 

The seven-thirties, as has been noted, have all been 
paid olf, and so have the three per cents. The govern- 
ment has never paid interest on the "greenbacks,'' 
and since the resumption of specie payments, (Jan. 1, 
1879), they have been redeemable in coin. They con- 
tinue to circulate and are popular. 

In consequence of the suspension of specie payments, 
another issue, known as ''fractional notes,'' was made, 
and were thus named because they were designed to 
supply the place of the fractional subsidiary coins, 
and were in face value only parts of a dollar, being 
issued in denominations of five, ten, twenty-five and 
fifty cents. They served as a convenience to the pub- 



254 POLITICAL ECONOMY. 

lie until they were superseded by the subsidiary silver 
coins, which again came into circulation. 

267. Funding. — The process by which different 
classes of debts are consolidated into one, or by which 
bonds bearing one rate of interest are so modified that 
the rate is changed and perhaps the time of payment 
extended to a future date — is known as funding. For 
illustration : the various debts incurred in the Revolu- 
tion by the Continental Congress and the separate 
States were funded into one class during Washington's 
administration, and the whole debt was assumed by 
the National government. Since 1881 the United 
States' debts in the form of bonds have been thus 
funded, as when the "five-twenties'' and the "ten- 
forties " were called in, and the secretary of the treas- 
ury proposed to pay their face value, or, if the holders 
preferred, to issue to them instead bonds of equal 
value, though bearing a lower rate of interest, but run- 
ning for a longer time. By this measure holders of 
such bonds were fairly dealt with, and the government 
threw forward the payment of its debt, which now bore 
a lower rate of interest. By this system of funding an 
immense amount of money in the item of interest has 
been saved to the American people. 



XXXI. 

THE LABOR QUESTION. 

268-278. In the discussion of this question a num- 
ber of conditions are involved. In a primitive state 
of society comparatively few work for wages, but the 
more civilized and advanced a people become the 
greater in proportion is the number of those employed 
by others. The more refined and cultured the state of 
society, the more extensive must be the manufact- 
uring establishments, and the more varied the indus- 
tries, whose products tend to satisfy the desires 
and promote the comfort of such a people. Their 
onward progress will be continuous; and in conse- 
quence the problem of labor, its employment and its 
remuneration, will also continue to be a subject of 
conditions, that, from time to time, will require read- 
justments — hence the propriety of students of politi- 
cal economy making themselves familiar with the 
outlines of this ever-living question. The great 
manufacturing or railway corporations must have capi- 
tal to found and equip them, and when in operation they 
require immense numbers of employes to carry them 
on. It is only when there is a true and harmonious 
combination of capital invested and of labor employed 



256 POLITICAL ECONOMY. 

that grand results are produced, since the two are 
mutually dependent upon one another. 

269. Application of the Golden Rule. — If the Golden 
Eule were observed there would be no conflict between 
labor and capital, much less an antagonism that is 
injurious to both. When capital takes advantage of 
the necessities of the workmen it commits a wrong 
that savors of tyranny, but the workmen are equally 
culpable when they fail to take special interest in the 
welfare of their employer and, it may be, are wasteful 
of the material in hand and neglectful in performing 
their work to the best of their ability. On the other 
hand, when the manufacturer may be running his 
vrorks and deriving scarcely a return, ovving to the 
state of the market, should he ask his employes to 
reduce their wages sufficiently to share with him a 
portion of the loss, and they seeing its justness accede 
to the proposal, in such instance the Golden Rule is 
applied, and, in consequence, a tie of good-will is 
strengthened between those who employ and those who 
are employed. 

270. Associations for Mutual Aid. — Workmen in the 
United States, when endeavoring to better their condi- 
tion, have sometimes adopted expedients which have 
been resorted to by their fellows in Europe, especially 
in England, and have formed societies under different 
names for their mutual benefit. Such associations — 
Trade Unions, Brotherhoods, Knights of Labor, etc. — 
are highly commendable when they carry out in 



THE LABOR QUESTION. 257 

various ways their ostensible object, the mutual im- 
provement of the members and their families. In 
addition, they can accomplish more in a united capacity 
than as separate individuals, and, should they deem 
themselves treated unjustly by employers, they are the 
better able to redress their wrongs. By such com- 
binations they can often secure higher wages and they 
can aid one another in obtaining employment. 

271. It is an interesting feature of these associa- 
tions that in improving themselves and their children 
they can promote the training of the latter in an 
education higher than that of their parents in skilful 
manual labor, in order that they may the more easily 
earn a living. On the other hand, it is a sad reflection, 
that we sometimes find these unions opposing young 
men learning trades, lest the latter should enter into 
competition with their own members. This is a form 
of wrong of the most injurious character. Especially 
is this the case in a city where young men and boys are 
debarred by these means an opportunity to learn 
trades, but on the other hand are left to themselves 
without proper restraint; thrown into the midst of 
temptation to become the victims of vice and idleness, 
and in the end, in all probability, criminals. Such 
wrongs are little short of positive crime. 

272. Price of Labor and Strikes. — Workmen have an 
unquestioned right to set the price on their own labor, 
as merchants have upon any commodity which they 
have for sale. They can agree among themselves what 



258 POLITICAL ECONOMY. 

that price shall be, and, oftentimes, if an employer 
does not comply with their demand for higher wages, 
they resort to strikes — that is, refuse to work — in order 
to enforce their claims. The latter method of redress 
should be resorted to only when all reasonable means 
of adjusting the difficulty have failed, such as arbitra- 
tion by competent and trustworthy friends of both 
parties. Before entering upon a strike the workmen 
should take into consideration the many contingencies 
that may intervene, that many men out of employment 
stand ready to fill the places thus made vacant by 
the voluntary act of the strikers themselves, and at 
the same prices which the latter have rejected. 
Another consideration is the state of the market for 
the articles which they are engaged in making — when 
the market is falling strikes always fail. The work- 
men should be specially careful not to infringe the 
rights of the community at large, who are innocent of 
any responsibility in the case. They should not, if 
possible, interfere with travelling on railways, and, 
what is still more objectionable, with the transporta- 
tion of the necessaries of life, thus bringing distress 
upon innocent people of limited means, as was the 
case in New York and other cities in the midwinter 
of 1887 and 1888, when a strike, based on a frivolous 
pretext, stopped the freightage of coal on an extensive 
line of railroads, and, in consequence, raised its price 
enormously to the poor, who purchase their coal in 
very small quantities, thus greatly distressing the fami- 
lies of those who work for wages as did the strikers 
themselves. 



THE LABOR QUESTION, 259 

273. On one occasion, when the employes of a sur- 
face railway in the city of New York were involved in 
a difficulty with its management, and, to bring the lat- 
ter to terms, the chiefs of the union compelled the 
men employed on the other surface roads to quit work, 
thus interfering with the comfort and rights of thou- 
sands upon thousands of innocent persons. High- 
handed and unjust measures like these alienate the 
well-known sympathy of the main body of the people 
from combinations of workingmen. The better por- 
tion of native Americans revolt at such outrages, the 
whole system of boycotting and strikes being foreign 
to their ideas and habits of justice and fair-dealing. 
An important element of success to both employers 
and employes is found in reciprocal kind feeling. 
Harsh measures of either party toward the other 
produces distrust, if not enmity. 

274. Distribution of Profits.— It is sometimes com- 
plained that the w^orkmen, in proportion to their share 
of labor, do not receive a corresponding share of profit. 
The answer is, as they have no share in the capital, 
they can claim nothing more than the wages agreed 
upon, since they run no financial risks, as do the 
employers. The above objection might be removed by 
a special agreement. If the workman has no capital an 
arrangement might possibly be made, by which the 
owners or corporation could assign to him individually 
a certain amount. 

275. Suppose the capital was 1500,000 aud one hun- 
dred workmen were employed, who as such were on an 



260 POLITICAL ECONOMY. 

equality, there would be assigned to each one $5,000 as 
capital. The latter would not own this amount of 
stock, and on it the owners might retain as interest, 
say seven per cent., in order to cover the expenses of 
the management, that is $350 ; but suppose the stock 
nets eight per cent, dividend, then each workman 
receives as his share $50. Meanwhile he has a fixed 
salary, mutually agreed upon, but if the profits of the 
business do not exceed seven per cent, he receives 
only his wages but no dividend. Such arrangement 
ought to induce the workman to be industrious and 
perform his work to the best of his ability, while he 
would be stimulated to acquire more skill, in order 
that his salary might also be raised. It is now for his 
own advantage not to waste the material upon which 
he works, and to take a special interest in the success 
of the business of the corporation. If a workman is 
idle or intemperate, and thus unfitted for the perfect 
performance of his duties, he would forfeit his right 
to enjoy the advantages offered. If such theory were 
put in practice, however, the risks would be unequal, 
as they would nearly all be incurred by the owners or 
corporations. 

276. Duties Enjoined Upon Workmen. — Those 
engaged in mechanical industries should strive to 
make improvements in their profession, and seize upon 
suggestions that may lead to more perfect work. 
They should utilize their time by putting it to the best 
use; economize in money matters, and acquire the 
habit of saving by depositing their surplus funds 



THE LABOR QUESTION. 261 

in savings banks, or in some way, tiiat it may be in 
safe keeping and also bring in an income. Meanwhile 
cultivate the graces taught in the precepts of Chris- 
tianity; avoid any indulgence of doubtful utility, and 
especially shun as an insidious enemy intoxicating 
liquors that tend to evil and nothing good, bring dis- 
tress and disgrace upon families and utter ruin upon 
individual character, and destroy the power to use 
skill, however great originally. 

277. Mechanics should also make efforts to have 
young men properly trained in their work, in order that 
they may be stimulated to greater exertion. In the 
large cities there are always yonng women, as well as 
men, that ought to be taught a trade or some mechanic 
art, in order that they can earn a living, and thus 
become self-supporting and self-respecting citizens. 
Workmen themselves should encourage this kind of 
training, for all must labor for a support, and any 
education that can secure that end is invaluable. It is 
a sad reflection that workmen, professing to be patriots 
and well-wishers of their country, often band themselves 
together under different unions or associations to pre- 
vent boys learning trades, lest they should interfere or 
crowd the field of labor in which they themselves are 
employed. 

278. Wages in Proportion to Merit. — It is the 

dictate of justice and common-sense that the skilled 
employe, other things being equal, should receive more 
wa-^es than the unskilled. That fact stimulates every 



262 POLITICAL ECONOMY. 

self-respecting workman to become as efficient as 
possible in whatever sphere of labor he may choose to 
engage. When this just principle of pay in proportion 
to the amount and the perfection of the work done is 
ignored, and instead regulations adopted by which all 
the members of the special association — skilled and 
unskilled, efficient and inefficient — receive the same 
wages, a great wrong is committed against the 
employer. The evil does not stop there; it retards the 
onward progress of improvement in mechanical indus- 
tries by taking away a stimulant to their greater per- 
fection. It also reacts in a moral sense upon the 
members themselves, inasmuch as in not performing a 
duty properly, lurks a temptation to dishonesty, in 
frittering away the responsibility of each individual 
workman to perform his respective work to the best of 
his ability. 



XXXII. 

CARE POR FUTURE GEN-ERATIONS. 

279-284. Political Economy looks beyond the 
present .and the intelligent and patriotic statesman has 
reference in enacting laws not only to their present 
effect but their future influence. That parent would 
be looked upon as little less than a monster who, for 
selfish ends or mere personal gratification, would waste 
his patrimony on himself without reference to the 
wants of his children, who are dependent upon him for 
their support and their proper training and education. 
Such conduct would merit the execration of men. 
The parallel is quite striking between the parent and 
his children, and the legislators of this generation and 
the generations that are to follow. The same principle 
applies not only to the legislatures and executives of 
the several States, but to Congress and the President. 

280. The instances are many wherein these 
legislative bodies can prevent the wastage and even the 
extinction of valuable portions of the heritage which 
belongs in common to this generation and to those that 
will come after. Many of our natural resources come 
within the limits of legislative supervision, such as the 
preservation of our forests, whose products should be 



264 POLITICAL ECONOMY. 

used as needed but not wantonly wasted, sometimes even 
under conditions that prevent a second growth for the 
next generation. Many States, and happily the number 
is increasing, offer inducements for preserving the 
forests and the general growth of trees. The plan 
adopted is chiefly in the form of a reduction of taxes in 
proportion to the number of trees annually planted by 
the farmers and others. 

281. Legislation to Prevent Loss. — Along the Atlan- 
tic coast of the United States, in consequence of the 
methods adopted by avaricious fishermen, some of the 
fishing interests have been almost ruined by the ex- 
haustion of the supply, as in the case of the lobsters 
along the coasts of New England and some classes of 
food fishes further south. It is essential that the sys- 
tem should be regulated by the legislative action of 
Congress for the benefit of the people of to-day as well 
as of those of the future. Some of the States and also 
Congress, furnish means to aid and encourage fish 
culture in our fresh-water streams and lakes, and in 
stocking certain rivers that flow into the ocean with 
migratory fish, on the same principle that Congress 
makes appropriations for internal improvements. In 
accordance with a wise interference by the National 
government the fur seal of Alaska, by far the most val- 
uable in the world, has not only been saved from ex- 
tinction during the last twenty-two years, but was until 
1891 on the increase in numbers. 

282. Various Aids to Agriculture. — Measures that 
would lead to the better cultivation of the soil would 



CARE FOB FUTURE GENERATIONS. 265 

be in the line of economy. If the farmers were taught 
to apply such knowledge to the best advantage in fer- 
tilizing and cultivating their farms, the gain to the 
Nation would be beyond compare. The general gov- 
ernment has moved in the direction of giving such 
instruction by endowing, to a certain extent, agricultu- 
ral colleges. In connection with thus legislating for 
future generations. Congress has instituted a series of 
surveys in order to ascertain the facilities by means of 
canals for irrigating the lands found available for the 
purpose on the plains and in the valleys in the vicinity 
of the Eocky Mountains. The melting snows upon 
the latter furnish an inexhaustible supply of water. 
These districts have alluvial soils, that are remarkably 
fertile and only need Nature^s great fertilizer, water, 
to make them abundantly productive. (Irrigation, 
Nat. Ees. XJ. S. pp. 389-394.) 

283. The Test for Native Voters.— It is not out of 
place in a Political Economy designed for American 
youth to direct attention to the fact, that the material 
prosperity of the Nation can be promoted by stimulat- 
ing the self-respect and general intelligence of the peo- 
ple. The system of public schools was completed 
throughout the Union, when the National government 
(1868) established them in the recent Confederate 
States. The cordial support they receive in the States 
where their beneficial effects have been so long recog- 
nized and appreciated is a guarantee of their contin- 
uance. There is one feature in the training of 
American youth to become citizens in good and regu- 



266 POLITICAL ECONOMY. 

lar standing, that in explicit terms has never been 
introduced, but which may well attract the attention 
of those elected to make our laws— both National and 
State. This omission could be supplied by the legis- 
latures of the several States enacting laws requiring 
every young man on his becoming twenty-one years of 
age to be able to read and write the English language 
before he is permitted to vote. The good effects of 
requiring such qualification would at once be seen in 
the case of all self-respecting young men, should they 
tind it necessary, in their hastening to qualify them- 
selves to become citizens in every sense of the term, 
and not in waiting as illiterates, to become twenty-one 
years of age. 

284. The Foreigner Also dualified. — One other law 
would be essential, in order to make the reform com- 
plete. Let Congress amend the naturalization laws so 
as to require the applicant for citizenship to be able to 
read and write the English language, before he is per- 
mitted to take the oath of allegiance. Foreigners 
have five years in which they may thus qualify 
themselves, and if they valued the boon of American 
citizenship, they would cheerfully comply with such 
reasonable conditions. If such laws were enacted and 
enforced, they would in twenty-five years make us, in 
theory at least, a nation of intelligent voters, since the 
unfortunate illiterates of to-day would in that time 
have virtually passed away, and the laws would forever 
forbid their ranks being recruited. 

THE EN-D. 



POLITICAL ECONOMY. 



QUESTIONS. 

INTRODUCTION AND 
I. 

SECTIONS 1—6. 

1. Give the reasons why Political Economy is a useful 
study. From what influences are American youth free ? 
What ought political equality to develop ? 

2. Why should American youth study this science from 
their own standpoint ? Give the reasons why the study is 
appropriate for both sexes. Tell why woman's influence 
should be welcomed. 

3. Trace the origin of the first human government, and its 
results. In these governments, v/hat was the condition of 
woman ? What was a hindrance in Asia to the spread of 
Christianity ? 

4. Name the basis of human society and government. 
Describe the influence of woman among the Greeks and Ro- 
mans. Name the other ancient peoples who treated woman 
more as an equal. Explain how the spirit of Christianity pro- 
moted her social equality. 

5. Give the meaning of the term economy. When, and by 
whom were books first written on the subject ? Describe the 



268 POLITICAL ECONOMY. 

process of forming communities. Why was the term political 
introduced ? 

6. Why the necessity for labor? Explain its accordance 
with the constitution of man. Wherein do the physical 
wants of man differ from those of other animals ? Describe 
how the wants of men led to the mutual exchange of the prod- 
ucts of their respective labors. Did any willingly work with- 
out compensation ? What was the simplest form of trade ? 
How did the factory originate ? In what respect is ours the 
golden age ? 

II.— p. 9. 
SECTIONS 7—13. 

7. Give the combined definition of political economy. In 
this study what should be borne in mind? How do the peo- 
ple perform their part ? Explain why the study is a branch 
of Social Science. Why does this study obtain only in a 
state of civilization ? Show how desires or wants increase. 

8-9. Repeat the first general law. Name the essentials that 
nature furnishes. Why must men labor ? Repeat the second 
general law. What motive stimulates man to labor ? Is this 
right to property duly recognized ? 

10. Repeat the third general law. Show which civilization 
develops the highest type of social qualities. Why does each 
generation require more to satisfy its desire than the one pre- 
ceding ? 

11. Repeat the fourth general law. Show how man must 
avail himself of the bounties of nature. State the law of equity 
in the cost of production. 

12. Repeat the fifth general law. Compare the desires of 
the savage with those of the civilized man. Give the illustra- 
tion in relation to ice. Explain why the wants of educated 
people are so many. How are these wants limited ? Compare 
to-day with the past — in respect to knowledge. 



QUESTIONS, 269 

13. State the value of mental training, or wealth. Illus- 
trate its effect upon employments. Explain how iron is 
obtained. Show the necessity of science in directing un- 
skilled labor. Give the instance of the plow and of spinning 
cotton. Sum up the grand result. 

III.— p. 16. 

SECTIONS 14—20. 

14. Show the teachings of political economy in all its rela- 
tions. How is the term wealth applied ? Give the illustration 
of the greenback, and of the railway. Give the definition of 
wealth. 

15. What is the original source of wealth? Explain the 
power man has over matter. With what did the Creator 
endow man ? Give the illustrations of how man's intellect 
utilizes the powers of nature. 

16. Show the process by which wealth increases. When is 
a man wealthy ? What three virtues assist him ? In what 
respect is nature bountiful ? Illustrate how the tastes of the 
civilized . man require almost unlimited labor. Give the 
instance of the farmer and the coffee raiser; and also the other 
exchanges. Enumerate the essentials for the comfort of a 
civilized family at the breakfast or dinner table. What is the 
effect of refined tastes and desires on the diversified industries 
of mankind ? 

17. Show why education does not cause the race to de- 
teriorate. Enumerate the indications in respect to the peo- 
ple of the United States. What has this to do with the 
elevation of character? 

18-19. What is said of diversified labor? Illustrate by the 
mechanic's tools. Give a summary how the materials of a 
house are procured. How may labor be unproductive? Give 
examples. Illustrate how labor may be positively injurious. 

20. Explain how labor may be influenced by the demand. 
Enumerate the classes of commodities that will always be in 
demand. What is said of fancy articles. In what products 
consist the main stimulus to labor? 



270 POLITICAL ECONOMY. 

IV.— p. 25. 
SECTIONS 21—25. 

21. Give the first definition of value, and how it is applied. 
Give the second, and the illustration. Compare the intrinsic 
value of gold with that of iron. 

22. Explain why value is a relative term? On what basis 
are commodities exchanged? State why gold was chosen as a 
standard of value. Explain why its discovery in Califorina 
affected prices. Give the causes which may affect values. 

23. Explain why exchange-value is service for service. 
What share has man in creating values? What is the base of 
exchanges among men? Give the illustration; show why 
value is not limited to material things. Give examples. 

24. What do we mean by price? Explain the difference 
between value and price. Tell why intrinsic value remains 
unchanged. When is the value lowest? 

25. Explain the influence of supply and demand upon 
values. What classes of commodities are affected the most 
by those fluctuations? Were there no variation in supply and 
demand; what the effect? Give a summary of the influence 
of competition on prices. Give the illustration. Give an 
illustration of your own. What is said of virtual monopo- 
lies? 

v.— p. 32. 

SECTIONS 26—39. 

26. Name and describe the /owr divisions. Cite the instances 
in which man modifies the original materials. Describe 
production and comsumption. Why is there an unending 
production? 

27-28. Describe the process which makes these produc- 
tions accessible to the consumer. Explain the mode and 
basis of exchange. Why are civilized men so dependent upon 
one another to supply their respective wants? How does man 



QUESTIONS. 271 

utilize natural resources? Describe how he avails himself of 
the powers of nature. 

29. What is said of man's directive power? Why can he 
claim as property his own productions? How did he first use 
power? Show how his facilities for usino- the powers of 
nature have increased. State how the application of these 
powers is his own work. Explain what the Creator supplies. 

30-31. Define mental wealth. How is it attained? The 
best aid ; is only what? What effort is essential to the grand 
result? How are mankind trained? Give a summary of the 
process. Describe fully the effect upon the race. 

32. What is said of inventors? Under what conditions are 
inventions useful? Give examples. Why the necessity for 
continuous labor? Give illustrations. 

33. What is said of the extension of knowledge? What of 
school-books? Describe the two lines on which the American 
people are advancing. Explain what is the essence of an 
educated mind. 

34-35. How does nature supply conditions? Illustrate by 
the blacksmith and the farmer. Give result of mental labor. 
Sir Humphrey Davy. 

36. What is said of Edison, of Fulton, of Stephenson? 
Describe the influence of inventions. What is said of the 
mathematician; the engineer; the chemist? 

37—38. Give incident of the farmer and the boy. Name 
and describe the two classes of natural agents. Describe the 
value of each. What is said of the horse? 

39. Enumerate the inanimate powers; the wind; the force 
of steam. Describe the work done by the latter. Tell how 
these powers have been adjusted by the intellect of man. 

VI.— p. 45. 

SECTIONS 40—42. 

40. Describe the three divisions of industries. Explain 
why agriculture is so important to man. Mention the facili- 



272 POLITICAL ECONOMY. 

ties for work that the farmers of to-day have. Explain why 
farming has little room for division of labor. What are its 
advantages? Why are so many persons in the Union engaged 
in agriculture? Whence comes the food not provided by the 
farmer? 

41. Explain why transportation is essential to both the 
producer and the consumer. Illustrate its advantages to the 
West and the East. Compare the means of transportation in 
the past with the present. 

42. What is said of commercial industry? Illustrate by 
sending Merrimacs to China, etc. Describe the process of 
fitting out the ship. What is said of the mathematician? 

VII.— p. 50. 
SECTIONS 43—48. 

43-44. Explain why division of labor secures rapidity and 
perfection in work. Give the illustration of training tlie 
fingers. Name the book, and relate the history of its effect. 
In what ways was it beneficial? State the effect on manufact- 
ures. Explain how division of labor aided different classes of 
work. What the effect on the numbers employed and on the 
price of the articles made? 

45. Give the illustration of making a barrel. Name the 
advantages in thus making barrels. Why are they better 
made and cheaper? 

46-47. The loaf of bread ; what is said of it? Describe its 
origin and how made, and how it gets to the consumer. Show 
the advantages of division of labor in manufacturing on a 
large scale. Illustrate that only one state of society fosters 
division of labor. What is the influence on the amount of 
work produced and its perfection? And its cheapness? Give 
the instance of the threshing-machine. What has been the 
general effect of the sewing-machine on dress-making? 

48. What is said of the evils incident to the division of 
labor? Show how they can be avoided. Why is the mental 



QUESTIONS. 278 

strain diminished by practice. How can tlie physical health 
of workpeople be preserved? Give a summary of the benefits 
of division of labor to the people at large. 

VIII.— p. 57. 
SECTIONS 49—54. 

49. Explain the connection between capital and labor. 
What is capital? How defined? In what sense is the term 
used in political ecomony? 

50. When does money become an active agent? Illustrate 
how. Show that the raw material is a small portion of the 
expense in manufacturing. Wherein is the great expense? 

51. Give the illustration of the range of capital. Instance 
the railway company. Describe how the surplus may become 
capital. What is said of a pleasure-yacht? 

52. Give examples of capital changing its form but increas- 
ing its value. Illustrate from the raw material as iron ore, etc. 
Describe how this principle pervades all mechanical indus- 
tries. How can capital become unproductive? 

53. Define the difference between fixed and circulating 
capital. Give illustrations of the two forms. Which one is 
the outgrowth of the other? Give the examples. What is 
money lying idle? 

54. Enumerate the usual causes of over-production. What 
should the manufacturer or capitalist take into account? 
What two markets ought to be considered? What the effect 
on the workpeople? 

IX.— p. 64. 
SECTIONS 55—58. 

55. Explain why skill is one form of capital. Give ex- 
amples wherein skill may be claimed as special capital. Give 
the illustrations, of the trained eye and the hand. 

56. In what respect do dividends derived from the several 



274 POLITICAL ECONOMY. 

classes of capital differ? State how the two classes of capital 
can be utilized. 

57. Show how the two classes^ of capital can be united. 
What is said of the farmer or the mechanic of limited means? 
Describe how the two capitals can act in harmony even in 
large enterprises. 

58. Repeat what is said of the two classes cooperating. 
Give the reasons why seldom single individuals enter upon 
extensive manufacturing, etc. Describe the mode of obtain- 
ing money-capital for large enterprises. Show the two- 
fold effect. Explain that under cooperation the two capitals 
can be combined without mutual interests clashing. 

X.— p. 69. 

SECTIONS 59—67. 

59. — 60. Define cooperation. Explain how the values of the 
two classes of capital are estimated. What is said of an ideal 
standard of skill-value? Give an outline of the cooperative 
plan suggested. Upon what class of woikmen would the 
plan act as a stimulant? Give the illustration in respect to 
dishonest work. State the evil influence of such practice on 
the workmen. 

61. Show upon what depends much of the success in manu- 
facturing establishments. Give a summary of the evils that 
result from injustice, either on the part of the employers or 
the employes. What rule of action should govern both 
parties? 

62. Give the reasons why large sums must be invested in 
great enterprises, in order to supply the desires of highly civil- 
ized nations. Who are ready to be employed in the great 
work? Give an outline of what justice demands. Show the 
evils of all being capitalists or all employes. State the bene- 
fits of both acting in harmony. How does capital benefit 
wage-eai;ners? 

63-64. What element is essential to the success of every in- 



QUESTIONS, 275 

dustry that is conducted on a large scale? Upon whom rests 
the obligation to deal justly? Give a summary of the diffi- 
culties in securing a perfect combination of benefits to both 
parties. Describe how one generation avails itself of the 
knowledge of the one previous. Give the illustration of the 
clock and the watch. 

65. What is the influence of education in using inventions? 
Why does cooperation, in order to be successful, require intel- 
ligence among its members? What is said of a caste feeling 
and of looliUcal equality f What of a common school education? 
In respect to education, what is peculiarly proper for us as a 
Nation? Upon what does its material progress depend? 

66. Give a summary of what is specially essential for the 
success of cooperation. What should be the prevailing pur- 
pose. What the influence of self-respect? Give a summary 
of the duties of the members. 

67. Show what can be the social advantages of a cooperative 
association. Describe how political economy recogonizes the 
importance of intelligence and morality. Mention the facili- 
ties for self -culture that can be utilized by the members of 
such associations. 

XI.— p. 80. 

SECTIONS 68—77. 

68-69. Why are taxes levied? State the difference between 
direct and indirect taxes. Name the several forms of taxes. 
Give the history of the relations between our two governments 
as to the mode of their support. Show the propriety of the 
National government being supported by duties on imports. 
Why do the State governments receive funds from taxes on 
real estate, etc.? On what conditions does the National gov- 
ernment reserve the right to levy an internal revenue or tax? 
Explain why each class of property should bear its share of 
sustaining the two governments. 

70. Explain the mode of levying taxes by the States. De- 
scribe the more complex system of obtaining funds by the 



276 POLITICAL ECONOMY. 

National government. Mention the contingencies in adjust- 
ing a tariff. Name the two main objects to be secured; that 
is, the requisite funds and afford also ample scope for the 
development of our mechanical industries. What two modes 
produce no revenues? Give reasons why neither of these can 
be adopted. Explain how the National government can 
avoid the evil. 

71. What interests does the third mode make secondary to 
obtaining revenue? How will true statesmanship legislate? 
Describe the limited range of the direct tax in contrast with 
the indirect. 

72. Show in what respects the expenses of manufacturing 
in Europe are much less than in the United States. What 
the difference in wages? What is said of equalizing the cost 
of production? Give the reasons why foreign property 
brought in for sale should bear its share of the expenses of the 
National government. 

73. How is the key applied? Give the illustration in the 
case of dress-silks. In what respect does this duty aid the 
American manufacturer and his workpeople? 

74. State the question and the negative answer. Why may 
not that principle be applied to all American manufacturing 
enterprises? What does justice to our workpeople demand? 
How could workpeople purchase if they are out of employ- 
ment? 

75. Give the reasons of the railway president. What is 
said of the home-made rails and the business of the rail- 
road? 

76. Explain the expediency of a judiciously adjusted tariff. 
Name the luxuries that have a greater duty imposed. Who 
purchase these cheerfully? 

77. Enumerate the classes of taxes besides the two chief 
ones. Give the purposes for which they are levied, and how 
they are collected. Name the difficulties encountered in im- 
posing and collecting an income tax. What is tlie system 
contrary to? 



QUESTIONS. 277 

XII.— p. 91. 
SECTIONS 78-84. 

78. Illustrate the character of a good government. What 
does the National government guard? What, in this connec- 
tion, should be the object of a government known only by its 
blessings? 

79. Give the outline of a plausible but misleading phrase. 
How does the principle apply to our wage-earners? What 
only commodity have they to exchange? 

80. Describe what judicious legislation accomplishes. Ex- 
plain why the American people demand a high grade of com- 
forts. Enumerate the foreign articles that our surplus of 
products is sufficient to purchase. 

81. Show why high wages and corresponding prices are more 
desirable than the reverse. Explain the tendency of home 
competition. Repeat what is said of deposits in savings-banks . 

82. In what way are the prices of commodities governed? 
Give the illustration in relation to railroad iron. State how 
the government intervenes. Why does the larger amount reg- 
ulate the price? 

83. What is said of the regulation of the price of wheat and 
coal? Show when the home production fixes the price. 

84. What is the influence of a standard of comfortable 
living upon American workpeople. Sum up what they enjoy 
and what they still wish. What do the American workpeople 
ask of legislation? State the two classes of competition in the 
United States. Explain the conditions under which competi- 
tion with the foreigner is fair. 

XIII.— p. 97. 

SECTIONS 85-90. 

85. Define wages — to whom given? On what conditions are 
men usually hired? Give the name usually applied to the 
wages paid the more responsible employes of corporations. 



278 POLITICAL ECONOMY. 

Name the terms applied in the case of lawyers, physicians, 
and also of agents. 

86. Give the distinction between real and nominal wages. 
Give the illustrations. Explain the effect of finding gold in 
California, on wages and the prices of commodities. Explain 
the change in prices soon after the close of the Civil War. 
Name the two remedies for the evil suggested. 

87. Show how speculation may affect prices, and indirectly 
wages. Name the products that are the more easily affected. 

88. Name in o'rder the modes of payments for labor. Show 
how employes may be imposed upon. 

89. Give a summary of the conditions that may affect 
wages. Enumerate respectively the employments that affect 
wages, and why? 

90. Explain how the relation between the employer and the 
employe may affect wages. Give examples. Show how 
diversity of employments affects wages. 

XIY.— p. 104. 

SECTIONS 91-97. 

91. How does the intelligence of the workman enhance his 
wages? State the advantages of training the pupils of the 
public schools in the principles of mechanics. Trace the 
effect of such training upon American youth. 

92. Give the number in the community that w^ork for wages. 
Explain what common-sense and prudence teach. What esti- 
mate do the American people place on labor? 

93. What is said of the complaints of workmen in respect to 
incomes? Show how the fruits of former labor are recognized. 
Explain the condition of the two periods. That of the for- 
mer wage-earner and that of the present? What appears to be 
the Divine arrangement? 

94. State all the items that are included in the dividends of 
the employer. Compare with their incomes the responsibili- 
ties, and care of the employer and that of the employe. 



QUESTIONS. 279 

95. What is just to the wage-earner and to his family? 
What the desire of patriotic statesmen? What is said of the 
style of living among American workmen? What is said of 
true self-respect? What of self-indulgence? 

96. Give the illustration how wages may be influenced. 
State the duties of both employers and employes. What gen- 
eral rule or principle sometimes prevails with both parties, 
instead of applying the Golden Rule? 

97. Explain how the selling-price of the products of the 
factor may affect wages. Trace the mutual rights of the 
employer and the employes. 

XV.— p. 111. 

SECTIONS 98-103. 

98-99. Compare the area and position of the United States 
with those of Euorpe. Compare the natural resources of the 
same. Show how industries are affected by climate. Give 
illustrations. How are the people benefited by diversities of 
industries? Show how trade is promoted between the States. 

100-101. • Give a summary of the characteristics of the differ- 
ent sections of the Union. Name the agricultural products in 
order. Show how competition influences wages. Cite the 
illustration. 

102. Explain why employers when they wish to curtail their 
expenses, usually lower the wages of their employes. How 
does competition among the employes themselves, affect 
wages? 

103. Give an account of competition in respect to monopo- 
lies. Describe the process. Explain the effect of injudicious 
competition. Give illustrations. From what do some such 
mishaps originate? 

XYI.— p. 117. 

SECTIONS 104-112. 

104. What is the ostensible object of the labor unions? 



280 POLITICAL ECONOMY. 

What efforts have been made to unite all the unions into one 
association? Where did labor unions originate? 

105. Explain the general plan of union in the United States. 
Explain why strikes are ordered. Tell what is said of a " tie- 
up." When do strikes often fail of their purpose? 

106. Explain how sacred rights are violated. Show the 
evil of preventing young men learning trades. What is often 
the consequence of the evil, especially in cities? 

107. Show the far-reaching evil influence upon the next gen- 
eration, of this wrong. State the rights of the members of 
the union. Show how changes should be made. 

108. Describe how these evils can be avoided. How can the 
grade of excellence be raised? 

109-110. Explain the mode of industrial partnerships. 
Show what would be a great gain if kindly feeling prevailed. 
Explain how the sphere of woman's labor has been increased 
within recent years. Show how the example set at Washing- 
ton has been copied. What is specially required of her in 
this enlarged field? 

111. Explain why the wages of women are comparatively 
smaller than those paid men. What is said of bygone custom? 
Give a summary of the arguments for and against. 

112. Give an outline of Dr. Wayland's views. 

XYII.— p. 124. 
SECTIONS 113—124. 

113. Describe the American home market. Give the rea- 
sons why it affects wages. Give a summary of the natural 
resources of the United States. What becomes of our surplus? 
What should we utilize? 

114. Explain the effect of settling new territories. How 
are wages affected by the home market? Show why the 
American people demand the comforts of life. 

115. Give a summary of the value of our foreign trade. 



QUESTIONS. 281 

Contrast that value with that of the home trade. What was 
an mstance of far-reaching wisdom? Give an account of the 
"Imperial Market" as stated by Mr. Gladstone. Show how 
our statesmen may profit by his suggestion as to the proper 
''policy." 

116. Give a summary of the questions and answers in rela- 
tion to an exchange of products. What class of goods will 
the Americans take in exchange? And what class will they 
make themselves? 

117. What is said of the population of Europe and the 
effect? What the influence of low wages? What is said of 
special American manufacturers? In what respect to a cer- 
tain extent are the nations of Europe dependent upon the 
United States? 

118. Describe fully how the American people are mutually 
dependent. Give the illustrations in full. What says an 
English writer on political economy on the subject? What is 
said of the cordon? 

119. Describe all the mutual interests involved. State the 
fallacy and injustice of mere cheapness. Give the illustration 
of the hatter, etc. Tell what honesty includes. 

120-121. What is said of the two interests? Give the illus- 
tration of the two classes of Merrimacs. Why and how does 
the National government interpose? On what ground is the 
foreign competitor welcomed? State why every producer has 
the right to name his own price. On what is that price 
based? On these conditions can the foreigner raise the price? 
Can he lower it? 

122. Explain on what grounds the importer pays the duty. 
Give carefully the illustration in respect to tea and coffee. 
Explain how the consumer would pay the duty. To what 
instances does this principle apply? What is said of the duty 
on competitive articles that come into our market? Give the 
illustration of the barley. In what instances does this princi- 
ple hold true? On the other hand, what is the statement? 
Give in full the reason for the enactment of the Inter-State 



282 POLITICAL ECONOMY. 

Commerce Act. What are the commissioners authorized to 
regulate? 

123. Explain the Mercantile theory of commerce. Why has 
the theory been rejected? Grive a summary of the different 
lessons taught by experience and statesmanship. Explain the 
true objects of commerce. Give the illustration of the flour 
merchant. 

124. Explain the two methods for diminishing the revenue. 
Give the reasons for each. What is said in this connection 
about high duties on luxuries? 

125. Give the reasons why the American people are so 
homogeneous. What does that condition promote? Give rea- 
sons why foreigners and their children are so easily moulded 
into the nation. What is said of their self-reliance? 

XYIII.— p. 139. 

SECTIONS 126—137. 

126-127. What is said in respect to the holding of land? 
Describe the mode of land holding in Palestine. Explain from 
history why we have no law of entail. What became of the 
large tracts of land given to royal favorites. Why were they 
broken up? 

128. Give the definition of rents. Give a summary of the 
varied forms in which the term is used. How is the rent 
graduated in rural districts. Name the various conditions 
that affect the rate of rent. 

129. Give a summary of the various kinds of soil. Tell 
how these affect the respective crops of different sorts. Show 
how these numerous grains, fruits, grasses, etc., must le 
planted in congenial soil. 

130-131. Explain why there is a limit to the production of 
the land. What are " diminishing returns "? Define ground- 
gent. Name the general rule pertaining to it. To whom 
usually accrues the benefit and to whom the loss? 

132. Name the essential elements that enhance the value of 



QUESTIONS. 283 

land. Describe how lands are made accessible to markets 
by roads, etc. Explain why the prairie-lands are so easily 
cultivated. What is said of the lands of the great West? 

133. How is the extra expense of high wages for labor over- 
come by the Western farmer? Compare the labor of preparing 
the native soil when covered by forests, and that of the prairie- 
lands. 

134-135. Explain fully why the increase of population 
affects rent. Show why garden land pays a higher rent- 
Why does land as property afford a comparatively low income? 
What is the explanation given? State what is said of the 
title, etc. 

136-137. Show how a universal desire exists to possess 
land. How has its possession affected men politically? 
What position has the government taken on the right of suff- 
rage? Explain why the value of land is often enhanced. 
What is the usual drawback in cities. 

XIX.— p. 146. 

SECTIONS 138—148. 

1-38. Define interest, in its three relations. What are loans 
on call? Give the illustration of the farmer. Show how the 
community is benefited by the judicious use of borrowed 
money. 

139. Explain how rates of interest are affected by risks. 
Enumerate the various kinds of risks. Give illustrations. 

140. How does the character of the borrower affect the 
rate? Describe the mode of mutual endorsements. Name 
the risks incurred in such operations. 

141. Show how the scarcity or abundance of money affects 
the rate of interest. State how circumstances increase the 
rate of interest. 

142-143. Give the reasons why prosperity enhances the rate 
of interest. In this respect compare the new states and terri- 
tories with the older portions of the country. Why are usury 



284 POLITICAL ECONOMY. 

laws necessary? State when such laws can be properly 
applied. How are they evaded? 

144. State the objections made to usury laws. Whom are 
they designed to protect? Explain how usury laws can be 
made the occasion for injuring correct morals. 

145. Define the meaning of dividends and profits. What 
are stock companies? Describe their sphere of action. 

146. Explain the mode in which such companies are 
formed. Why are they incorporated? Describe the manage- 
ments of such corporations. When are the profits properly 
declared? 

147. Explain in what way such companies are liable to 
risks. Enumerate the mistakes that may be made by the 
management. 

148. Show what two elements are combined in making up 
the dividends. Explain the relation which the stock-holder 
sustains to the corporation. State the benefits conferred upon 
the people by those corporations. 

XX.— p. 154. 

SECTIONS 149—159. 

149. What are the conditions under which exchanges are 
made? Name the facilities used in making exchanges. 
Explain the importance of exchanges. 

150-151. Define a market. What two markets are known 
to trade? What their influence on the producer? Describe 
the various modes of exchange. What do these complicated 
exchanges involve? Give the illustration of the Texan 
planter, etc. 

152. Name the accepted measure of value and the utility of 
its adoption. Are values relative, and why? Illustrate the 
basis of the value of commodities. 

153. State the two inherent elements of value. Explain 
the effect of supply and demand on the exchange value. 
Show the tendency of cost and competition on market prices. 



QUESTIONS. 285 

154. What does free competition regulate? Explain the 
remedy for over-production. What is said of cost, etc.? Is 
the lack of foresight an evil, and why? Name the conditions 
that influence values. Explain why deficiencies in manufact- 
ures can be rapidly supplied. What is the case with agricul- 
tural products? 

155. Explain the necessity for exchanges, and why? Is 
the mutual dependence of the people limited to mere neigh- 
bors? Describe the office of the merchant. Show how man is 
socially affected by this dependence. 

156. What is the effect of these exchanges within the 
United States? Show how industry stimulates exchange. 
Describe the effects of such stimulus to promote civilization. 

157. Explain why these free exchanges have a tendency to 
unite the American people in sympathy. What is said of our 
available territory? Contrast our homogeneity with that of 
the nations of Europe. What is said of our fertile soil and 
diversity of climate? Explain why we are so independent in 
respect to the comforts of life. 

158. What is said of the classes of products exchanged 
within the Union. Give a summary of our home productions. 

159. Explain how exchange belongs to the system of the 
division of labor. Give illustrations. Describe the vocations 
of the merchants, the brokers, the bankers, etc. Why does 
the system become more and more complex? 

XXI.— p. 164. 

SECTIONS 160—170. 

160i What is said of trade in early times? Give an account 
of the first instance on record in which silver was used as a 
medium of exchange. 

161. Name the different metals that have been used as 
money, where and at what time? Define the word pecuniary. 
Give reasons why silver was stamped or coined by the govern- 
ment. What does the stamp authenticate? Why did silver 
become so prominent? 



286 POLITICAL ECONOMY. 

162-163. Give the reasons why gold and silver became the 
standard of value in the commercial world. What two condi- 
tions are essential to coined gold and silver? Before coinage 
was adopted name the liabilities to fraud. Give the history of 
coinage. Explain why gold and silver must be alloyed when 
coined. 

164. Give the respective weights of pure gold in a dollar 
and also of the alloy. Give the same of the silver dollar. 
IS^ame the usual ratio of value between gold and silver. What 
is understood by standard weight? Name the component 
parts of our three and five cent pieces. 

165. Give the reasons for the variations that have occurred 
in the ratio of the values of gold and silver. What is said of 
free coinage? How can it be abused? What is the ratio of 
gold to silver in Europe? what in the United States? Quote 
the opinion of Baron A. Rothschild. 

166. Explain the utility of having a standard value. Give 
the illustration. Explain why gold and silver are the products 
of labor. 

167. Give the illustration of the ten-dollar gold coin or 
bank-note. How is money characterized? What should be a 
measure of value? 

168. Explain how the relative values of gold and silver 
were adjusted. Define bimetallism. What is said of gold as 
a legal tender? And of silver? 

169. When does legal tender interfere in payments? Define 
the difference between being legally liable and morally. 
Explain the effect if both gold and silver were legal tender to 
any amount. 

170. What is said of the fluctuations, etc., of gold and 
silver? What is said of the output of silver? Give the 
history of the gold currency in the United States and also of 
the silver. 

XXII.— p. 174. 

SECTIONS 171—182. 
171-174. Cite the influence of confidence of man in man. 



QUESTIONS. 287 

What the effect on mercantile transactions? Give illustrations 
how this confidence pervades society. Name the forms of 
credit. Give the illustration. What is said of the credit of 
banks? What is the process of depositing in banks or invest- 
ing in stocks? Describe how bonds are a form of credits. 
Give examples. 

175-176. Show how bank-notes are a form of credit. What 
is meant by private credit? Describe on what rests the credit 
of the greenbacks and National bank-notes. Explain the 
basis of credit. How can credit command capital? 

177-178. Explain the various uses of credit. Describe the 
result of the proper use of borrowed capital. Enumerate the 
advantages of utilizing business talents. What is the effect of 
bringing into use the small sums held by the people? 

179. Explain why a check on a bank is a form of credit. 
What would be the effect if the system of credit was aban- 
doned? 

180. Describe the process of adjusting accounts in clearing- 
houses. How has this system been extended? 

181. Explain how mercantile paper is used. State the 
liability or risks involved. 

182. What is said of the ring? And its results sometimes? 
What is said of reckless speculations? Name other ways in 
which confidence is often abused. 

XXIII.— p. 182. 

SECTIONS 183—190. 

183-184. Give the origin of banking. Show why it is a 
labor-saving machine. Explain ^how banks facilitate busi- 
ness. Give the process by which loans are obtained from 
banks. What is said of discount? 

185-186. What are promissory notes? Explain how used. 
What are bank-notes and how used? On what is their credit 
based? Why are such notes convenient? When are they 
accepted at their face value? 



288 POLITICAL ECONOMY. 

187-188. How should the issue of bank-notes be regulated? 
Give the illustration. Give the modes of protecting the 
depositors. What is said of all the notes being returned to 
the bank's counter at one time? 

189-190. What are savings-banks and what their design? 
Why are the directors careful to have good security? Give 
the reason. Why do they pay a comparatively low rate of 
interest? Explain the manner in which commercial banks 
conduct business. 

XXIV.— p. 187. 
SECTIONS 191—194. 

191. What was formerly the prevailing custom in chartering 
state banks? What were the consequences? How was the 
stock often made up? Explain the risk run by the depositors. 

192. How far did state banks extend their circulation? 
When came the remedy for these evils. Explain why these 
notes were held at a discount outside the State. What was the 
only medium of exchange throughout the Union? 

193. Describe the basis of credit of the National banks, 
what is said of the discounts paid? Explain why they are 
received at par? Give the regulation by which a National 
bank can be organized. Explain why there is no distinction 
in these bills. 

194. Describe the conditions under which the National 
banks are organized. How are they guarded against over- 
issue? Are the notes perfectly safe, and why? Explain why 
the system is uniform throughout the Union. 

XXV.— p. 191. 
SECTIONS 195—213 

195. Give the reasons why the discussion of these hvo 
systems, is specially valuable to American youth. Explain the 
relations between the two governments. Explain that we 



QXfJBSTIOSS. 289 

have two independent sources of revenue. Define the author- 
ity delegated to Congress, and the effect. 

196-197. Define the two terms, indirect and direct taxes. 
Explain how they are levied and how collected. Which ob- 
ligatory and which voluntary in regard to payment? Give 
the reasons why this subject is of peculiar interest to the 
American people. Define free-trade and protection. 

198. What is the effect of free-trade upon direct taxes? 
Give the reason and justice why foreign property brought in 
for sale should be exempt from import duties. Explain what 
class of property pays a low percentage of profit. 

199. Explain the two kinds of competition. For what 
purpose should Congress legislate? Explain the underlying 
principle in respect to price. What applies to both the 
European and American manufacture? 

200-201. Why should not the American manufacturer pro- 
tect himself and his employes if he pays higher wages? What 
right is claimed by all nations? Explain why it is difficult for 
Congress to adjust a tariff. Explain how the respective wages 
paid can be taken as a basis. 

202-20.3. Explain why an American tariff cannot be ab- 
solutely perfect. What is said in relation to the rate of the 
tariff on silk fabrics when compared with the respective 
wages paid? Explain the fair competition of the foreign with 
the domestic articles. 

204. Explain in full what is proposed in the extension of the 
division of labor. What is the reason given for the theory of 
such extension? State the effect of climate on certain pro- 
ductions. What the influence of extreme cases? Why can 
the American people manufacture for themselves? Why not 
utilize their own numerous resources? 

205. Show why free-trade with outside nations is not 
adapted to the United States. What form of tax is repug- 
nant to the American people? What is said of high-priced 
luxuries? What the policy of the American people? 

206. Explain what would be poor economy for the Ameri- 



290 POLITICAL ECONOMY. 

cans. Show why on certain articles they cannot compete 
with Europe. Name what the Americans have to exchange. 

207. Show how free-trade discriminates against American 
property. Why should foreign property he held more sacred 
than domestic? Give the illustration of the case of silks and 
an acre of ground. What is said of the impulse given to 
individuals? 

208. Explain the governing principle in commerce. Give 
the illustrations, etc. How does England discriminate? and 
why? Show how free-trade is only a theory. What is said 
of the kindly feeling among nations? 

209. Explain the philanthropic theory. Show how the 
American people manifest their humane sentiments. Explain 
the Homestead Act, and its effects. 

210. What should American youth study in this connection? 
What confronted Congress in 1789? How did England treat 
the American Colonists? What did William Pitt say and 
mean? What happened to American industries through Brit- 
ish merchants? 

211. Explain the difficulties of the American statesmen of 
that day. Give an account of the legislation of the First Con- 
gress. What is said of the preamble ? Describe the influence 
of that legislation. What is said of their great rival? 

212. Show wherein this legislation was judicious. What is 
said of the import duties defraying the expenses of the 
National government? Describe the effect of a tariff too high 
and of one too low. Explain how the golden mean is attained, 
and the result. 

213. Give a summary of theory versus practice. Give the 
inference drawn. Give the exceptions. When is the duty 
imposed a protection ? 

XXVI.— p. 207. 

SECTIONS 214—238. 

214. Cite the two aphorisms. Show how the second one 



QUESTION 291 

applies especially to wage-earners. How is the second one 
made applicable ? What interests are to be guarded? 

215-216. Show the advantages of high wages. What is 
said in respect to comforts ? Cite the facts in respect to the 
deposits in savings-banks. What is the object of the legisla- 
tion on the subject? Enumerate how disturbing elements may 
creep in. Show how these may call for a revision of the 
tariff. 

217. From whom do American wage-earners purchase the 
necessaries for their families? Explain how much do they 
expend on foreign products. Give the illustrations of these 
exchanges. Show the benefit of all industries being success- 
ful. Show how they sustain one another. What is the effect 
of home competition ? 

218-219. Explain the only commodity of the wage-earner. 
What is admitted and then added by free-traders ? How 
would wage-earners be affected ^?'si and second f What would 
be the rate of the diminution of wages? What would be the 
effect if both governments were to be supported by direct 
taxation ? 

220-221. In what two ways do the funds derived from 
import duties aid the workpeople? What competition do the 
protectionists wish? Show how they are consistent. What 
is said of monopolists ? 

222. Show that international free-trade is not available. 
What is said of the social inequalities in Europe ? Describe 
what protectionists wish to secure. What is said of the 
availability of the people of the United States? 

223. Give the reasons for a home free-trade among our- 
selves. What is said of our extent of territory ; of our diver- 
sity of climate and productions? Describe our means of 
internal communication, etc. 

224. Name the elements of harmony that prevail among 
the American people. Their industries; their natural re- 



292 POLITICAL ECONOMY, 

sources; political equality; their civil and religious liberty; 
public schools. The continuous intercourse among the peo- 
ple from one section of the country to another. Contrast 
these with Europe. 

225-226. Describe what should characterize an American 
tariff. What is the scope for the exercise of the peculiar 
shades of talent, etc.? Why is it a nation of itself? Why 
does England import grain free of duty. Why does she im- 
pose a duty on tobacco and liquors? Show how the United 
States exercises the same right of importing free of duty raw 
materials which they cannot produce themselves. Name the 
articles thus brought in. 

227-228. What is said of the change of basis as to one of 
the objects of the tariff? How is it adapted to affect wages? 
Give the American idea of the State. Tell what patriotism 
demands. What is said of the native-born workpeople? 
Give the comparison. 

229-230. Explain the influence of intelligence in manufact- 
uring. What do the advocates of protection propose? What 
says the London Times f What does free-trade ignore? 
Give the additional reason urged by protectionists; and 
why? 

231. Give a summary of what is said of assertions and 
facts. What the statistics on the subject? Compare the 
comforts of foreign wage-earners with those of the American. 
What is said of absolute right, etc.? State the reply. 

232-233. Explain how wages seek their level. State the 
process by which wages are forced down. What remedy do 
protectionists apply? Free-trade makes a change. . What is 
the result? Explain why cheap commodities are not so desira- 
ble as living wages. Who are the consumers? Why do they 
truly buy cheaply? 

234. Explain how our own free-trade market is aided by a 
judicious tariff. Give the illustration drawn from the new 
States and Territories. What facts do free-traders ignore? 



QUESTIONS, 293 

235. What is said of American manufacturing one hundred 
years ago? Give the illustration in respect to items of indus- 
try. Name the facilities with which manufacturing com- 
mences in the Western and Southern States. What is said as 
to the expense of living? 

236. Give in full a just comparison. What is said of the 
cordon? What is said of sudden whims? Wherein are the 
rivalries? 

237. Reciprocity, how defined? Explain why the position 
of the United States is unique. Why is reciprocity peculiarly 
available for them? What is said of their mechanical indus- 
tries? 

238. Name the productions of the United States. Show 
how reciprocity does not interfere with our mechanical indus- 
tries. Name the productions of the countries which are 
affected by reciprocity. Explain why a bounty is given on 
sugar. Who names the price on foreign sugar? Explain 
why these bounties under the circumstances are an act of 
justice. Describe why the policy is far-reaching. Give an 
illustration. 

XXVII.— p. 229. 
SECTIONS 239—248. 

239. Explain the main object of this form of a tariff. 
Show in what position it places the National government. 
Describe the effect upon the manufacturers and their em- 
ployes. Show in what respect this scheme of a tariff fails in 
promoting the interests of our people. What is said of the 
difference in the cost of production? 

240. What is said of a tariff whose rate did not equal the 
difference in the cost of production? Who is the first to 
suffer? In American manufactures what percentage of the 
cost is in the wages? 

241. What is the rate of the raw material when compared 



294 POLITICAL ECONOMY. 

with the price of the finished product? Give the illustrations. 
What representation is misleading? Give the illustration 
drawn from the bale of cotton. 

242-243. What is the effect upon the nation that exports its 
raw material? and what the reverse? Give the summary in 
full. 

244. Compare the primary object with the promise of inci- 
dental protection. Give the objections of protectionists to 
this scheme. What remedy do protectionists propose? Give 
the historical illustrations. 

245. Explain what protectionists claim of secondary im- 
portance. What two ends have been attained? In what way 
should a tariff be adjusted? Explain the policy of a high 
tariff on luxuries. Whom does this policy befriend? 

246-247. Describe the two modes of regulating the revenue. 
Explain the different effects of the two modes. What is 
claimed for the second mode? Describe how trusts origin- 
ated. What is said of monopolies? Give an instance. 

XXVIII.— p. 239. 
SECTIONS 248—252. 

248. Give the definitions of socialism. How did it find its 
way to the United States. Explain why it cannot prevail to 
much extent in the United States. Contrast the aid given by 
governments. Describe the caste influence in Europe. 

249-250. Give a summary of the aims of socialism. What 
is said of its success? Show how it is opposed to the order of 
society. How does the system propose to elevate man? 
Explain the barrier? What is said of the ownership of land? 
Describe the worst influence of socialism. 

251-252. What is the proper sphere of the State in aiding 
the citizen? What is said of production? State the expe- 
rience of the ages. Show what American institutions supply. 



QUESTIONS. 295 

Name the three elements of success. What is the demoraliz- 
ing effect of socialism? Give a summary of its influence. 

XXIX.— p. 245. 

SECTIONS 254—259. 

254. Explain why railroads are so beneficial to the people. 
What function has always been exercised, etc.? What is 
meant by "eminent domain" ? 

255-256. For what purpose are charters given to such cor- 
porations? What is the duty of the proper authorities? 
Describe how such corporations are organized. Explain how 
the business is managed. On what principle do the stock- 
holders vote? 

257-258. Enumerate the rights which a railroad corporation 
exercises. Why cannot the citizen do the same? What is 
said of the public good? Show why the railway is an agent 
of the State. What service does it perform? Enumerate the 
rights of the stockholders. In what respects is the stock 
private property? 

259. Give a summary of the benefits of railways to the 
American people. Describe the interchange of our various 
products. Show wherein railways supply the home market. 
Describe their stimulating influence upon the varied indus- 
tries of the Union. 

XXX.— p. 250. 

SECTIONS 260—267. 

260-261. In what respect have we been complimented? 
From whom did we borrow money abroad? Give a summary 
of the Nation's debts at different times. State the amount for 
each inhabitant at these different periods. What was the 
amount of debt at the close of the Civil War. Give the rea- 
sons why the pupil should study the subject. 

262-263. State the dilemma. In what respect did the 



296 POLITICAL ECONOMY. 

national authorities act cautiously? Name the difficulties in 
their way. How were these overcome? Give the dates and 
the several amounts which Congress authorized to be bor- 
rowed. 

264-265. Describe the different classes of bonds. How 
was the interest paid? What is said of registered bonds? 
What was designated by their names? Give the examples. 
What is said of greenbacks? Is interest paid on them? Ex- 
plain how the government obtains coin to pay the interest on 
its bonds. 

266-267. Describe the character of the bonds issued near 
the close of the War. Their rate of interest and when due? 
Give an account of the " fractional notes." When and how 
were they superseded? Explain how funding is accomplished. 
Give the results. 

XXXI. -p. 256. 
SECTIONS 268—278. 

268-269. Explain why among a highly civilized people a 
greater proportion work for wages than in a primitive state of 
society. Why will the labor problem continue to be one of 
interest? What combination insures success? Explain the 
eifects of the application of the Golden Kule. 

270-271. Show how associations of workmen can aid their 
respective members. Give reasons why when combined their 
influence is increased. Name the good effects on their fam- 
ilies. Show the injustice of opposing young men learning 
trades. 

272-273. Explain an unquestioned right. Explain how 
strikes can be abused. Before entering upon a strike, state 
what should be considered. Explain what rights should not 
be infringed. Give illustrations in which strikes have injured 
innocent persons. What is the effect of such high-handed 
measures upon the sympathies of the people at large? 



QUESTION ;s. 297 

* 

274-275. What is said of the distribution of profits? Cite a 
possible arrangement by which the employer and the employe 
might share the profits. What the effect of such arrange- 
ment? What is the advantage to the workman? How would 
lie forfeit rights? 

276-277. Cite some of the duties and obligations of work- 
men. What should he cultivate and what shun? What is 
said of training young men and also young women? Wherein 
is the advantage of such training? 

278. Give reasons why wages should be in proportion to 
merit. Show why the reverse is an evil. Illustrate the prin- 
ciple of doing honest work. 

XXXII.— p. 264. 

SECTIONS 279—284. 

279-280. Describe the parallel between the parent and the 
United States government. Give the illustration of the pres- 
ervation of forests. What is said of the plan? 

281-282. State what is said of the fishery interests. Ex- 
plain how the food-fishes can be increased in both the sea, 
and in inland waters. What of the fur-seal? What is said of 
the aid afforded farmers? Describe what Congress has done 
in the cause. How is irrigation promoted? 

283-284. What is said of the public schools? What of intel- 
ligent voters? What is said of the enactment of laws on the 
subject? State the result of such laws upon native young 
men. What should Congress demand as a qualification of the 
foreigner? Explain what would be probably the effect if both 
these laws were properly enforced. 



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